ICAEW.com works better with JavaScript enabled.

TAXguide 08/18: the corporate interest restriction – a practical guide

Technical release

Published: 14 May 2018 Update History

In TAXguide 08/18 Anton Hume and Andrew Stewart, BDO LLP, provide a detailed analysis of the corporate interest restriction calculation using practical examples. Read a summary here, Tax Faculty members can download the full guide.


Following the enactment of the Finance (No 2) Act 2017, the corporate interest restriction (CIR) has effect from 1 April 2017. The rules were slightly updated by Finance Act 2018, which received Royal Assent in March 2018, with most changes taking effect from 1 April 2017; there is potential for further change, in particular in respect of changes to finance lease tax treatment.

This TAXguide, written by Andrew Stewart and Anton Hume, BDO, provides a practical overview of the rules and illustrative examples to demonstrate how the calculations work.

HMRC guidance states that ‘the aim of the rules is to restrict a group's deductions for interest expense and other financing costs to an amount which is commensurate with its activities taxed in the UK, taking account how much the group borrows from third parties.’

This follows on from one of the recommendations in the OECD Base Erosion and Profit Shifting Action Plan published in late 2015.

Groups with net interest expense (including certain lease expenses) in the UK below a £2m per annum de minimis threshold should not face a disallowance, however even here some care may be required to understand the reporting requirements and to determine whether any elections may be beneficial for future periods.

The legislation can be found in ss372 – 498, part 10, Taxation (International and Other Provisions) Act 2010.

Join the Tax Faculty

The Tax Faculty offers expert guidance and support enabling you to provide the best advice on tax legislation to your clients or business. We offer clear direction in taxing times.

TAXguide 08/18

Tax Faculty members and ICAEW members can download this guidance in full.

Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250