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Budget 2016 - Interest expense tax deduction

24th March 2016

Budget 2016

 

Interest expense tax deduction

 

From 1 April 2017, the UK will introduce a restriction on interest deductions for corporation tax purposes which is targeted at large groups. There will be a de minimis threshold of £2m net UK interest expense. For tax purposes, interest deductions will be restricted to 30% of a group’s UK earnings before interest, tax, depreciation and amortisation (EBITDA).

 

However, groups that are highly geared for genuine commercial purposes, may apply a group ratio rule instead of the fixed rule. This will be based on the net interest to EBITDA ratio for the worldwide group.

Leanne Rozier