Think tank cautions against cutting tax relief on interest

A study by the Oxford University Centre for Business Taxation has found that
cutting tax relief on interest will damage the competitiveness of the UK tax

The research from the influential think tank comes as the UK Treasury
considers how to adapt the tax system to respond to challenges from the European
Court of Justice, which could cost the government billions of pounds.

The European
Court of Justice
has challenged the way dividends and controlled
foreign companies are taxed, and the
Treasury has
indicated that it may change tax relief on interest to make up for the potential
losses from the ECJ challenge.

The Oxford University Centre for Business Taxation polled 14 tax executives
from leading multinationals and found that they were opposed to reducing the
rate on interest relief from 30% to 15%.

They were also opposed to
of interest relief – where the full relief
would only be granted for debt used in the UK – as it would be too complicated.

The most popular possible reform, the report found, was to cut the relief on
interest paid to 15% at the same time as reducing the taxation on interest
received to 15%.

Further reading:

Read the full report

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