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Timely opportunity to consider the impact of the Interest Limitation Rule on your corporation tax liability for 2022

Have you considered the impact of the interest limitation rules (ILR) on your preliminary tax liability for 2022?

For large companies (i.e. those with a tax liability in respect of the previous year over €200,000) the first instalment of preliminary tax will be due by 23 June 2022 in respect of a 31 December year end. Therefore, this is a timely opportunity for corporate real estate participants to consider how the ILR (effective 1 January 2022 for calendar year ends) might impact corporation tax liabilities for 2022.

What are the tax implications?

Readers may recall that under the ILR, financing costs which previously have been fully tax deductible may now be partially restricted. This could result in an increased corporation tax liability above that which may be expected for some companies for 2022. While exemptions and reliefs exist which can in certain instances improve the position, under the headline ‘Fixed Ratio Rule’ the ILR seeks to limit a taxpayer’s net financing costs to 30% of a tax defined EBITDA. Decisions will also need to be made by taxpayers such as whether to be assessed on an individual company basis or as part of a local interest group.

How can we assist?

The Deloitte Real Estate Tax team have modelled the expected impact of this rule for some of the most common real estate structures and as such are well placed to discuss potential risk areas with you and risk mitigation strategies. Please get in touch to discuss the impact on your group today.

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