1. New UK interest restriction rules
From April this year, new rules will limit corporation tax deductions for UK corporate borrowers. The ceiling for allowable UK interest expense will generally be 30% of UK EBITDA, subject to a higher limit under a group ratio test. There is to be a limited exemption in relation to third party debt for UK infrastructure companies and for UK property companies holding only UK real estate let for 50 years or less. Problems with this exemption could arise where the real estate is held as partnership property or a parent guarantee is given.
2. Non-UK residents to become subject to UK corporation tax
Non-UK resident landlords, which constitute a substantial part of the UK property investment market, are unaffected by the new interest restriction rules. However, the UK government has announced a consultation on extending the scope of UK…