CIoT calls for two year delay to changes to tax relief for corporate interest expense

THE CI0T has called on the government to delay changes to tax relief for corporate interest expense to help businesses adjust to the new regime and prevent a negative impact on inward investment to the UK.

The government is reviewing the rules on interest deductibility that apply within the UK in light of the recommendations set out in an OECD report on Action 4 of the BEPS project. The CIoT told a government consultation that the mooted start date of April 2017 is too ambitious given the scale and complexity of the new regime.

It said there is no need to rush in changes in this area because there are already a variety of rules which limit the tax deductibility of corporate interest expense, such as the Worldwide Debt Cap restrictions and the GAAR.

A delay of two years would give the government time to properly review the impact of this new regime on the UK’s competitiveness, and enable further and ongoing consultation on the detail of the legislation, allowing the policy to be translated into law accurately and effectively. That the OECD has not finished its work in this area is another reason to delay.

Glyn Fullelove, Chair of CIoT’s technical committee, said: Given existing strong Exchequer protections, the government should not be going so much faster and further than the rest of the world in introducing a measure such as this that potentially impacts on many commercial structures.

“The complexity of applying a formulaic rule makes it imperative that the rules are properly thought through and that the legislation is clear, that it operates smoothly, and does not seriously impact the UK’s competitiveness.”


The CIOT said the proposed UK regime does not take full advantage of the flexibility offered by OECD recommendations. In the UK, there is currently no intention for grandfathering provisions and the public benefit project exclusion is very narrowly drawn. This  is a particular concern given the focus on using the private sector to provide long-term finance for public sector infrastructure.

Fullelove said: “We would like to see the UK rules allow for grandfathering, either generally or for specific sectors which rely on long-term funding, carry forward/back allowances and the group ratio uplift that the OECD and EU recommend.”

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