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Corporate interest restriction (CIR): Finance Bill amendments

Corporate interest restriction (CIR): Finance..

The Government has published proposed amendments to the CIR rules, including extending the deadline for appointing a reporting company.

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The Government has published draft legislation making certain amendments to the CIR rules for inclusion in Draft Finance Bill 2018/19. Changes that are wholly relieving will take affect retrospectively from 1 April 2017. Most other changes will take effect for periods of account of the worldwide group beginning on or after 1 January 2019.

Click here to access the draft legislation.

One of the proposed amendments is to extend the deadline for appointing a reporting company until 12 months after the end of the relevant period of account (as compared to six months under the existing legislation), thus aligning the deadline for doing so with the deadline that applies for filing the interest restriction return. We understand that this change will only apply to appointments made from Royal Assent. Where the original deadline for a group has passed and the group failed to appoint a reporting company before that deadline, HMRC can be asked to exercise their discretion to appoint a reporting company for the group.

HMRC will also be given a new power to publish a notice requiring specified additional information that is reasonably required for the purposes of the CIR rules to be included in an interest restriction return.

Several of the other proposed changes are intended to align amounts taken from the group accounts (principally, the group’s ‘adjusted net group-interest expense’ or ‘ANGIE’, which forms the basis for the debt cap under the fixed ratio method) with amounts taken from the tax computations, either on a mandatory or elective basis, for example:

  • Clarifying that finance amounts capitalised into the value of a financial asset or liability will only be included in ANGIE when written off in the group’s consolidated accounts, rather than when they are capitalised;
  • Confirming that, if an ‘alternative calculation election’ has been made, finance amounts capitalised into a GAAP-taxable relevant asset (such as a post-April 2002 intangible fixed asset) will be recognised in ANGIE when they are written off in the group’s consolidated accounts;
  • Aligning the recognition of amounts in respect of the impairment or release of loans with connected companies outside the CIR group for purposes of calculating ANGIE with their treatment for UK corporation tax purposes (this could be relevant, for example, where a group company is treated as being in a separate CIR group because its results are not consolidated on a line by line basis); and
  • Adding a fifth requirement to the ‘alternative calculation election’, so that (where made) this will also align the recognition of employee remuneration that is not paid before nine months after the end of the period of account with UK tax principles, for purposes of calculating ‘group-EBITDA’ under the group ratio method.

Changes will also be made to improve the interaction of the CIR rules with the rules for real estate investment trusts (REITs) to ensure that the REIT interest cover ratio test does not give rise to double restriction of interest payable.
Certain other changes clarify the way that certain elective provisions operate, for example:

  • Clarifying how the ‘non-consolidated investment election’ applies where the investor group would otherwise have net finance income; and
  • In relation to the elective public infrastructure regime:
    • The scope of the assets that will qualify towards meeting the ‘assets test’ will be extended to include certain pension fund assets and deferred tax assets; and
    • A new provision will be added to ensure that reimbursement of expenses will not prevent pre-13 May 2016 related party loans from benefiting from grandfathering.

For further information please contact:

Rob Norris

Mark Eaton

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