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Thin Capitalisation

Jo Myers Senior Consultant and Peter Male Partner both with Ernst & Young's Transfer Pricing Group in London provide an overview of UK rules on thin capitalisation
The concept of thin capitalisation
The term thin capitalisation is generally taken to refer to a situation where a company has a high level of debt capital relative to its equity. Multinational groups often finance their business operations via funding between group companies since this allows them to make most efficient use of their overall cash resources. Faced with a choice between funding subsidiary companies with debt or equity debt is often preferred principally because tax deductions can be claimed in respect of interest although this...

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