London: +44 (0)20 7236 2601
St Albans: +44 (0)1727 869141
Rickmansworth: +44 (0) 1923 771010
Milton Keynes: +44 (0)1908 605552

Is claiming tax relief for interest paid really tax avoidance?

Press reports have indicated that companies have avoided tax by claiming large tax deductions for interest payments, for example, on debt that funded its buy out.

Companies are being castigated as tax avoiders for claiming interest relief within limits set out in the tax legislation.  Surely, claiming interest relief in accordance with the law is not tax avoidance.  The companies have not done anything illegal; the deduction of finance costs is not included within definitions of tax avoidance.

HMRC has a range of anti avoidance measures to prevent interest deductions where there is tax avoidance and, generally, UK companies claiming tax relief for interest need to demonstrate that these are on an arm’s length terms.  HMRC can challenge excessive payments.

Claiming relief within the law for actual and reasonable costs is surely not tax avoidance.



Date: 8th November, 2013
Author: Cathy Corns


Articles from this Author

4th April, 2018
EMI options - a current risk

20th March, 2018
Beneficial loans

20th March, 2018
IR35 consultation

20th March, 2018
Tax codes

Contact Business Service Partners

Choose from the drop down menu below to select a Partner to contact.


Mercer & Hole Chartered Accountants support @alzheimerssoc as their charity of the year

Jamie Wooldridge to speak at the Business Accelerator Summit MK…



For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole

Click here to follow us on LinkedIn