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The CIR regime and acquisition finance

Matthew Mortimer and Kirsten Hunt (Mayer Brown) explain how the corporate interest restriction regime applies to UK acquisition finance transactions. Straightforward it is not.

A UK purchaser group will often finance its acquisition of a target group by borrowing from third party and possibly connected lenders i.e. as part of an acquisition finance transaction.

One of the key attractions of that method of finance will be expected UK tax deductions for the purchaser or borrower group in relation to interest and other finance-related expenditure. As a general rule expenditure of this nature is deductible for a UK borrower company in accordance with its treatment in the borrower’s ‘GAAP’-compliant accounts (CTA 2009 Part 5 Chapter 3).

However relevant rules such as the UK’s anti-hybrid transfer pricing and unallowable purpose provisions may restrict those deductions. Moreover if this is not the...

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