As stressed in the adjoining column the CIR is a structural restriction on interest deductibility which has to be considered regardless of the commercial underpinning of the relevant loan arrangements and their tax-related motivation (if any). This means that the CIR can restrict interest deductibility in a wide range of circumstances depending upon factors such as the level of leverage within the borrower group (does its net group interest expense exceed the £2m annual de minimis?) the composition of the group’s balance sheet (the more tax-interest income it receives the better since this will net down tax-interest expense and generally reduce potential restrictions under the regime) and whether the group can and wants to access exemptions from the regime such as the public benefit infrastructure exemption.
Although largely mechanical the CIR rules are complex and potentially time-consuming to apply relying...
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