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Tax deductibility of corporate interest expense

Global Tax Update:June 2016/United Kingdom

Following consultation, it was announced at Budget 2016 that new rules will be introduced which limit the tax relief for the interest expense that can be claimed by large multinationals. The new rules will be in line with the OECD/G20’s recommendations under Action 4 of the BEPS project and will apply from 1 April 2017. (Global Tax Update:June 2016/United Kingdom)

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This newsletter explains the following topics; 

1. Tax deductibility of corporate interest expense

Following consultation, it was announced at Budget 2016 that new rules will be introduced which limit the tax relief for the interest expense that can be claimed by large multinationals. The new rules will be in line with the OECD/G20’s recommendations under Action 4 of the BEPS project and will apply from 1 April 2017. The Government has now published a further consultation document on the detailed policy design and implementation of these rules.

2. R&D Expenditure Credit (“RDEC”) replaces R&D super-deduction for large companies

The 30% R&D super-deduction regime for large companies ended on 31 March 2016. From 1 April 2015, when the RDEC was introduced, companies were able to choose between the regimes, although once the RDEC had been chosen that was irrevocable.

3. Consultations

HM Treasury has launched a consultation on how best to deliver proposed reforms in corporation tax loss relief legislation, and how to deal with the interactions with other areas of the corporate tax system. Comments are invited by 18 August 2016.

4. VAT: Business review work supplied to lenders – Supreme Court Judgment

The Supreme Court has dismissed the Airtours Holidays Transport Limited "person supplied" appeal, by a narrow (3-2) majority. The majority agreed with the conclusions of the Upper Tribunal and Court of Appeal that the independent business review carried out by PwC was supplied to the lenders, and not to Airtours, even though the company was liable to pay for the report.

5. CJEU decides against taxpayers in ‘payment processing’ exemption cases

The CJEU has delivered its judgments in the ‘payment handling’ cases of National Exhibition Centre Limited (on a reference from the Upper Tribunal) - and Bookit Limited (referred from the First-tier Tribunal). The cases concerned the VAT treatment of fees charged by the NEC and Bookit and whether they were exempt from VAT as payments for handling debit and credit card payments.

 

>> Click for Japanese [法人の利子損金算入 ほか] 

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