HMRC have published an overview of groups’ compliance obligations under the new corporate interest restriction regime.
HMRC have published a short guidance note regarding the circumstances in which a group may wish to consider appointing a ‘reporting company’ under the new corporate interest restriction (CIR) regime, which applies from 1 April 2017. This article takes a look at the new and existing guidance in this area, as well as some of the reasons why it will often be advisable for a group to appoint a reporting company and file (at least an abbreviated) CIR return, even if the group does not expect to suffer a CIR disallowance.
In this article, we try to tie together the key points from those three sources. We note there are subtle differences in emphasis in the three sources, so the final detailed HMRC guidance will need to be reviewed when available.
Overview of key rules
The CIR rules say that a group may (but does not have to) appoint a reporting company. If the group does not appoint a reporting company, HMRC may (but does not have to) appoint one for it.
If the group has appointed a ‘reporting company’ (or HMRC have appointed one for it), it will be obliged to submit a CIR return.
If the group has not appointed a reporting company (or the reporting company has failed to submit a compliant CIR return), and the group is subject to a CIR disallowance, the obligation defaults to individual UK group companies to calculate the group’s total CIR disallowance and disallow their pro rata share of this in their CT returns.
Groups subject to CIR disallowance
Where a group is subject to a CIR disallowance, it is likely to want to appoint a reporting company, so as to allow flexibility for the group to:
Groups not subject to CIR disallowance
Where a group ‘reasonably estimates’ that it is not subject to a CIR restriction (either because its net tax-interest expense is below £2 million per annum or below its ‘interest capacity’ under the fixed ratio method), HMRC’s guidance confirms that the group may ‘do nothing’ (i.e. not appoint a reporting company or file any CIR return), provided it keeps appropriate documentation to evidence the position.However, the group may still wish to appoint a reporting company, and file at least an ‘abbreviated’ return, in order to:
Note that in some cases, it might be necessary for a group to appoint a reporting company and file a CIR return including one or more elections (e.g. a group ratio election), in order for the group to be able to ‘reasonably estimate’ that it is not subject to a CIR disallowance. In such a scenario, HMRC have confirmed to us that it is legitimate for a group to file an abbreviated return which includes the relevant election(s).
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