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

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.

TAXguide 08/18

Tax Faculty members can download this guidance in full.



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.