There is good and bad news on the vexed issue of corresponding adjustments for individuals. The bad news is that the harsh new restrictions have been introduced with immediate effect from 25 October. The good news is that the government has listened to some of the arguments made during the consultation and removed a couple of the more punitive elements.
Although existing arrangements are not ‘grandfathered’ the removal of corresponding adjustments will not apply to amounts accrued in respect of periods prior to 25 October 2013. This had been a major concern as interest on junior debt in private equity financed companies often rolls up for several years before payment.
The other change relates to excess leverage. Interest in excess of the arm’s length amount will be characterised as a dividend for income tax...
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