Corporate Interest Restriction: The Basic Rule

Following the recommendations of the OECD’s ‘Base Erosion and Profit Shifting’ project on interest expense (Action 4) and several consultations, the UK’s general corporate interest restriction will come into effect in April 2017.

The potential impact of the interest limitation rule is expected to be significant for some groups. The Government anticipates it will raise approximately £1bn of additional tax a year. This is a significant amount in the context of total corporation tax receipts of £43bn in 2014/15 and the relatively narrow tax base to which the rule will apply. The new rule applies from 1 April 2017 so, although only draft legislation has been released, it is important that groups consider the impact now based on what we currently understand of the shape of the rules. 

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