Possible restrictions on interest deductions
Officials from HM Treasury and HMRC have been considering the implications of possible future restrictions to tax relief for interest payments.
It seems likely that changes to the UK’s current rules for interest relief will be required due to the Organisation for Economic Cooperation and Development’s (OECD’s) project on counteracting tax avoidance.
The perceived problem is that integrated global financial systems mean that, in theory, debt finance can be relatively easily raised and moved across tax jurisdictions to facilitate profit shifting. The OECD plans to issue a discussion document on this in mid-December 2014 and it is due to make formal recommendations in September 2015.
The UK government has flagged that changes to the UK’s rules on interest deductibility may be required.
Any structural restrictions on interest deductibility are likely to have a detrimental effect on projects that are highly geared.
Unfortunately there are no real details yet – but watch this space.
Date: 1st December, 2014
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