The UK Government launched a consultation on 22 October 2015 regarding the UK corporate tax rules for interest deductibility. The consultation seeks views on the design of a general limitation for UK corporation tax deductions for interest and similar finance costs, imposing a cap calculated by reference to a fixed percentage of the borrower’s EBITDA. The exact percentage is yet to be decided, but would be between 10% and 30% of EBITDA. The proposals follow the recommendations on interest deductibility made earlier in October by the OECD Base Erosion and Profit Shifting (BEPS) project. Any new rule is unlikely to come into effect before 1 April 2017. However, the UK Government has indicated that grandfathering of existing loans will be available “only in exceptional circumstances.”

View full memo, Consultation over Fixed Cap on UK Tax Deductibility of Corporate Interest Expense: Plucking the Feather in the Cap?