Consultation on changes to the deductibility of interest for companies

The Government has recently launched a consultation on amending the UK’s interest deductibility rules for companies.

The consultation follows the OECD’s recommendations as part of the Base Erosion and Profit Shifting (BEPS) project.

In line with those recommendations, it is proposed that a company’s net interest deductions be limited to a fixed ratio of its profits with an entity exceeding the fixed ratio being permitted to deduct interest expense up to its group’s ratio of net third party interest to EBITDA, if that is higher.

These recommendations, if implemented, could have serious implications for industries which are highly leveraged.

Those wishing to contribute to the consultation have until 14 January 2016 to do so.

The consultation can be read here.