HMRC has issued a consultation on the design of the new corporate interest deductibility rules which are to have effect from 1 April 2017.
The new regime is intended to restrict the deductibility of interest payments by applying a fixed ratio of 30% of a UK group’s tax EBITDA. The changes are also intended to replace the current debt-cap rules with new rules placing limits on deductible interest to net accounting finance expenses. These changes are significant and there is concern over the lack of grandfathering provisions and absence of draft legislation. Taxpayers will have relatively little time to adapt and the administrative burden is likely to be significant for those corporates which will have to comply with the new rules.
The consultation documentation is available to view here.