Corporate interest restriction (CIR)

All companies within the charge to UK corporation tax are subject to the CIR rules.

The basic rule is that deductions for interest above the de-minimis amount of £2m will be restricted to the extent that it exceeds 30% of the UK Group’s EBITDA (fixed ratio) as calculated for UK tax purposes.

If the worldwide group has a level of interest expense on external debt which exceeds 30% of the group’s EBITDA, this threshold may be raised to that level by making a group ratio election.

Unfortunately, the group ratio election carves out related party debt (bad news for the PE community).

The CIR rules also include a debt cap restriction. The maximum interest deduction in the UK will be restricted to the net interest expense of the worldwide group. This means that if a group has no third-party debt then UK interest deductions are restricted to £2m.

We help businesses to understand and apply the CIR rules and undertake the following CIR compliance work:

• Appointing a reporting company for CIR nomination
• Submitting CIR returns to HMRC
• Preparing CIR calculations
• Incorporating the CIR restriction into corporate tax returns