Restrictions to tax relief for interest payments
16 March 2016
The Chancellor has set out his stall for how the UK will implement the OECD's recommendations on imposing restrictions to tax relief for interest payments. All UK businesses with borrowings will have to re-evaluate their tax position on the back of today's announcement. The move will likely increase costs at a time of economic uncertainty.
Whilst these changes have been on the cards since late last year, the shock factor is the speed with which he intends to make these changes and additional restrictions to losses. Businesses were calling for a decent amount of time for transition and this timetable risks introducing changes that even the OECD hasn't worked out how to implement.
Industries such as infrastructure and real estate, and indeed companies currently coping with economic distress, will be looking closely at what has been said today to see if the Chancellor has listened to their feedback and provided them with some form of protection from these changes. M&A deals could also be affected, if the additional cost of debt hasn't been priced in.
The Chancellor is keen to be seen as leading the way for the international community in tackling tax avoidance. With this in mind, it is not a surprise he is moving ahead of other G7 nations to adopt international recommendations on tax relief given to business for borrowing costs.
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