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Consultation on restricting tax deductibility of corporate interest

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HMRC is consulting until 14 January 2016 on a general rule for restricting corporate interest deductions, to align UK practice with the recommendations in Action 4 of the OECD’s BEPS project. The consultation summarises these recommendations and asks respondents how these should be implemented in the UK. Any new rule is unlikely to be introduced before 1 April 2017. HMRC states that ‘the government recognises that this would be a major change to the UK corporate tax regime and will require careful consideration to ensure any new rules work appropriately, including taking into account the beneficial impact of an 18% corporation tax rate’.

Charles Yorke, partner at Allen & Overy, commented: ‘The Treasury would appear to be broadly supportive of the OECD’s recommendations. However, I suspect that the UK would think twice about enacting these rules unless the whole of the EU were to follow – in particular, Ireland and the Netherlands. What has surprised me is the ambivalence towards a group ratio rule – a fixed ratio rule on its own would be somewhat uncompetitive when compared with the likes of Germany.’ See

Issue: 1283
Categories: News