A ‘UK Bidco’ may borrow to finance its acquisition of a target group. One of the key attractions of that borrowing will be expected tax deductions for interest, which will usually reduce the borrower group’s cost of capital. Unfortunately, the UK’s corporate interest restriction or ‘CIR’ regime has significant potential to limit those deductions. Affected practitioners, therefore, need to understand the impact of CIR in this area. They may also need to understand certain basic ways of mitigating that impact, such as CIR’s group ratio rule and its public infrastructure and other exemptions.
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A ‘UK Bidco’ may borrow to finance its acquisition of a target group. One of the key attractions of that borrowing will be expected tax deductions for interest, which will usually reduce the borrower group’s cost of capital. Unfortunately, the UK’s corporate interest restriction or ‘CIR’ regime has significant potential to limit those deductions. Affected practitioners, therefore, need to understand the impact of CIR in this area. They may also need to understand certain basic ways of mitigating that impact, such as CIR’s group ratio rule and its public infrastructure and other exemptions.
If you are not a subscriber, subscribe now to read this content.
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