Budget 2016: Consultation on interest relief changes | KPMG | UK

Budget 2016: Careful consultation needed on implementation of interest relief changes

Budget 2016: Consultation on interest relief changes

Robin Walduck, Tax Partner at KPMG, comments on changes to interest relief.


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Commenting on changes to interest relief announced in today’s Budget, Robin Walduck, Tax Partner at KPMG in the UK, said:

“The announcement by the Government today in relation to interest relief demonstrates their ongoing commitment to the OECD’s BEPS process. The decision to include a Group Ratio Rule will be welcomed by business, as there was concern that the Fixed Ratio Rule would be introduced in isolation. This confirmation will reinforce the ‘open for business’ message.”

From 1 April 2017, interest relief will be as follows (with consultation following later this year):

  • Fixed Ratio Rule: Net interest expense restricted to 30% of a group’s UK EBITDA
  • Group Ratio Rule: based on net interest to EBITDA ratio for the worldwide group as set out in the OECD’s report
  • A de minimis group threshold of £2 million of net UK interest expense
  • Rules introduced to address volatility in earnings and interestRules introduced to address volatility in earnings and interest
  • Rules introduced to ensure that the restriction does not impede the provision of private finance for certain public infrastructure in the UK where no BEPS risk is evident

“The current broad interest relief rules are a key component of the UK tax system and the Government will need to consult carefully and extensively with business to ensure that the changes are introduced in a manner that does not distort the UK’s competitive position in the international market. There is unfortunately no comment at this stage as to how the rules will be applied in the financial services industry, which will hopefully become clear when the consultation is published later in the year.”


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For further information please contact:

Jess Liebmann, KPMG Corporate Communications

T: 0207 311 3245 

M: 07551 135 778

E: jessica.liebmann@kpmg.co.uk 

KPMG Press office Tel:  +44 (0) 207 694 8773

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