BEPS – Are You Affected?

Over 100 countries and jurisdictions are collaborating through the OECD to implement measures to tackle base erosion and profit shifting (BEPS). The OECD have set out 15 actions points that aim to equip governments with the domestic and international instruments needed to tackle BEPS (i.e., to ensure that profits are taxed where economic activities generating the profits are performed and where value is created).

Draft legislation has been published for inclusion in Finance Bill 2017 imposing a restriction on interest deductibility for UK corporation tax payers from 1 April 2017. Supplementary legislation was published on 26 January 2017 clarifying certain aspects of the new regime including the public infrastructure exemption described below. Existing loans are not grandfathered. The proposal has caused significant concern amongst taxpayers in certain sectors, including the real estate sector where historically significant leverage has been deployed.