UK and International Tax news

Updated Draft Legislation On Corporate Interest Restriction

Tuesday 31st January 2017

HMRC has recently published updated legislation for inclusion in the 2017 Finance Bill on the proposed changes to the tax deductibility of interest expense in international corporate groups.

From 1 April 2017, all corporate groups will be able to deduct up to £2m of net interest expense and similar financing costs in the UK per annum. Above this de minimis, the new rules will cap deductions for the net interest expense to the higher of 30% of taxable earnings (the fixed ratio rule) or a proportionate share of the worldwide group’s net interest expense (the group ratio rule). The existing debt cap rules will be repealed but will be replaced by a modified debt cap which will limit interest deductions to the net interest expense of the worldwide group.

The updated draft legislation includes further provisions on the group ratio rule and on the ‘public infrastructure exemption’ which is designed to protect investment in infrastructure that has a public benefit.

If you would like more information on the proposed changes, please contact Keith Rushen on 0207 486 2378.

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