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Corporate Interest Restriction: reporting

17 November 2017

The new Corporate Interest Restriction has effect from 1 April 2017, bringing additional compliance and reporting requirements

The new Corporate Interest Restriction (CIR) has effect from 1 April 2017, affecting all periods ending after that date. All UK companies will need to consider how they approach the new rule.


What does the rule look like?

The rule will apply to a ‘group’ headed by a corporate or listed entity including subsidiaries, as defined under International Accounting Standards, with certain exceptions.

An interest allowance will be calculated under either:

  • Fixed Ratio:                   30% of ‘tax-EBITDA’
  • Group Ratio:  Group’s ratio of third party             interest to EBITDA, up to 100%.

The interest allowance will be limited based on figures drawn from the group’s consolidated accounts, with various adjustments.

The group’s interest capacity will be the higher of the interest allowance and a £2m De Minimis (pro-rated for short periods).

Interest disallowed under the CIR is carried forward and (in theory) could be reactivated, giving a deduction in later years if the group’s circumstances change.

It is notable that a disallowance under the CIR does not impact on withholding tax obligations or the tax position of the lender.


Will I need to do anything?

Yes. All groups should consider whether they will file a CIR return. A return will be required if:

  • HMRC nominates a reporting company (within three years of the period end).  Guidance suggests this will occur if there is any disallowance under the rules
  • A group elects a reporting company (within six months of the period end).


When a group should elect:

It is important to note that filing a return is separate from applying the CIR rules – those will remain applicable even if no filing is required. Filing a return is necessary in order to:

  • Carry forward interest allowances
  • Make certain elections under the CIR rules
  • Allocate any interest disallowance to specific companies
  • Allocate interest reactivations (which will not be relevant in the first period).

Where applicable, an abbreviated return gives a simple filing option that keeps flexibility to extend to a full return if beneficial.

The de minimis provides an important threshold when considering what approach to take.

If the total net tax-interest expense across the UK companies in the group (ie tax deductible interest less taxable interest income) is below the £2m annual de minimis and won’t exceed this level in the next five years, there is unlikely to be any benefit in filing a return.

In other cases, it is likely to be worth filing at least an abbreviated return. The contents of full and abbreviated returns and a summary of the options are shown below. 


Summary of options


No return

Abbreviated return

Full return

When possible

  • Where HMRC does not appoint a reporting company
  • Where no disallowance in the period
  • Always (if reporting company appointed)


  • No filing required
  • Straightforward filing with limited information
  • Permits elections
  • Can be replaced with a full return
  • Permits elections
  • Permits carry forward of surplus interest allowance
  • Permits allocation of reactivation and disallowances
  • May be required anyway


  • May lead to missed elections and allowances
  • Lack of flexibility
  • Does not permit carry forward of allowances
  • Does not permit allocations of reactivated interest
  • If net interest expense is under De Minimis then additional time and effort required to prepare return


Abbreviated returns

An abbreviated return may only be made if the group is not subject to a restriction of interest. It must contain:

  • The name (and UTR if relevant) of the ultimate parent company of the group
  • A list of the names and UTRs of all companies in the group
  • A statement that there is no disallowance
  • A statement that the return is accurate.


Full returns

A full return must contain the same detail as abbreviated return, plus:

  • A statement of calculations, including details of tax-interest and tax-EBITDA figures for all companies subject to UK tax, relevant accounts-based figures and the interest allowance and interest capacity
  • Statement as to whether there is a disallowance and if so detail on how it is allocated
  • Statement as to whether there is a reactivation of interest and if so detail on how it is allocated.


Filing requirements

Once a reporting company is appointed (by election or by HMRC), it will have an obligation to file a return within twelve months of the period end, or if later three months from its appointment.

An amended return may be made up to three years from the period end (or five years if replacing an abbreviated return with a full return), or if later three months from the reporting company’s appointment. 


Election of a reporting company

A reporting company needs to be appointed by a majority of eligible companies (those in the charge to UK corporation tax and not dormant throughout the period). This must generally be within six months of the period end, although commencement provisions may extend this to 31 March 2018.

The reporting company must notify the eligible companies (and the ultimate parent company) that it has been appointed. The reporting company will be granted statutory powers to require the relevant data to complete a return from other UK group companies.

An appointment may be revoked by a majority of eligible companies.


How BDO can help

The principles of the CIR are relatively straightforward, however there are many detailed provisions and care should be taken. BDO can provide guidance on the potential impact of the CIR on your business, including an assessment of whether any elections should be made to optimise the position of the group.

For help and advice please contact Andrew Stewart or Anton Hume.