Corporate interest restriction ― overview

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Corporate interest restriction ― overview
  • How does the CIR work?
  • Carried forward amounts
  • Practical considerations
  • Further reading

The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are detailed below.

TIOPA 2010, ss 372498 (Pt 10); CFM95000 onwards

Before looking at the detail of the rules, it is important to note that there are a few points that are specific to the CIR regime, as follows:

  • the rules operate in relation to the worldwide group and by reference to the period of account (PoA) of the group for which the consolidated financial statements are prepared. A worldwide group usually refers to an ultimate parent and each of its consolidated subsidiaries, although it is possible to have a single-company worldwide group
  • the CIR works on a group rather than a company-by-company basis which is different to most taxing provisions. What this means is that most calculations required by the rules are carried out at the group level with any interest restrictions etc being made afterwards to individual companies (TIOPA 2010, s 473; CFM95210)

The CIR applies to ‘tax interest expense’. This is the legislative phrase used to encompass a wide range of interest and interest-like transactions such as:

  • most loan relationship debits
  • some derivative contract debits
  • the finance cost element of certain arrangements or transactions involving finance leasing, debt factoring or service concession arrangements

TIOPA 2010,

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