The Government has endorsed recent OECD recommendations arising out of the Base Erosion and Profit Shifting Project (“BEPS”) regarding the introduction of a general interest limitation rule. As part of this process, the Government is seeking views as to the form of a new general rule for restricting interest which would be a major change to the UK’s regime and could, subject to the scope of its application, have a significant impact on private equity groups and their ability to benefit from tax reliefs for interest expense.

We would recommend that private equity groups consider the implications of the proposals and provide their comments to the consultation. The results from the consultation will be considered in developing a business tax roadmap, although any changes are unlikely to be introduced before 1 April 2017. There may also be some grandfathering of existing structures, but any such grandfathering is likely to be limited to third party debt arrangements only.