Practitioner view: The corporate interest expense restriction – risk allocation implications

As stressed in the adjoining column the CIR is a structural restriction on interest deductibility which has to be considered regardless of the commercial underpinning of the relevant loan arrangements and their tax-related motivation (if any). This means that the CIR can restrict interest deductibility in a wide range of circumstances depending upon factors such as the level of leverage within the borrower group (does its net group interest expense exceed the £2m annual de minimis?) the composition of the group’s balance sheet (the more tax-interest income it receives the better since this will net down tax-interest expense and generally reduce potential restrictions under the regime) and whether the group can and wants to access exemptions from the regime such as the public benefit infrastructure exemption.