There is a proposal to be introduced in Finance Act 2017 for a cap for some larger companies and groups on the amount of corporation tax relief for interest and other financial payments. From 1 April 2017, subject to a de minimis threshold of £2 million net UK interest expense per annum and provisions for public benefit infrastructure, relief is capped at broadly 30% of taxable earnings before interest, depreciation and amortisation (EBITDA) in the UK, or based on the net interest to EBITDA ratio for the worldwide group. This broadly follows the recommendations of the BEPS project.
Previous so-called ‘worldwide debt cap’ rules would then cease to apply to companies from 1 April 2017. Where applicable, the tax deduction for the finance expense payable by UK members of a group of companies is restricted by the worldwide debt cap to the consolidated gross finance expense of the group.