The measure
HMRC announced today that informal consultation will be conducted in June 2011 on practical issues identified in applying the debt cap rules, such as the application of the de minimis rule (which removes companies with net finance income or expense of less than £500,000 from the calculations).
Who will be affected?
The debt cap applies only to large (EU definition) worldwide groups with one or more relevant group companies (broadly 75% subsidiaries).
When?
The intention is that legislation to allow businesses to more easily apply the rules will be published for consultation in autumn 2011 for introduction in Finance Bill 2012.
Our view
It is certainly good news that HMRC are addressing some of the practical problems inherent in the debt cap rules but, disappointingly, the rules have been in place from 1 January 2010 and are still unclear in a number of areas. This further highlights the complexity of the provisions and the burden these rules place on affected businesses, which appears contrary to the drive for simplification.
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