UK introduces new corporation tax limitation on interest deductibility

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March 2017


The draft UK Finance Bill 2017 was published in early December 2016. The Bill contains detailed draft legislation to introduce a new limitation on the deductibility of interest expense from corporate profits. These rules, which were further amended on January 26, 2017, will apply to amounts accruing after April 1, 2017. The rules limit a UK group’s ability to deduct interest from taxable profit, to the lesser of:

  • a defined percentage of taxable EBITDA (i.e., Earnings Before Interest, Taxation, Depreciation and Amortization). This will be either 30% or a percentage based on the group’s worldwide interest/EBITDA ratio, and
  • the group’s worldwide consolidated net interest expense.

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Maarten Maaskant

Maarten Maaskant

International Tax Desk Leader, PwC US

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