The Corporate Interest Restriction (Electronic Communications) Regulations 2022: Corporation Tax
Published 7 July 2022
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Who is likely to be affected
Large businesses within the charge to Corporation Tax (CT) which incur, or may in future incur, net interest expense and other similar financing costs (within the scope of Corporation Tax) above £2 million per annum.
General description of the measure
The regulations make changes to the way businesses can deliver certain notices and returns relating to the Corporate Interest Restriction (CIR) regime from 1 September 2022. It makes electronic filing through the use of HMRC approved methods mandatory.
Policy objective
HMRC has developed two electronic methods for businesses to submit certain notices and returns relating to the Corporate Interest Restriction regime – an online form and an application programming interface (API). In line with HMRC’s digital strategy, the regulations make it mandatory for all businesses to make submissions using one of these two methods. It is intended that this will provide certainty to customers that submissions have been successful, reduce HMRC inefficiencies in locating and processing documents, and improve HMRC’s ability to detect inaccuracies.
Background to the measure
The Corporate Interest Restriction regime at Part 10 and Schedule 7A, Taxation (International and Other Provisions) Act 2010, applies from 1 April 2017.
These rules restrict the ability of large businesses to reduce their taxable profits through excessive UK interest expense. They are part of the government’s wider changes to encourage alignment of the location of taxable profits with the location of economic activity and are consistent with the UK’s territorial approach to corporate taxation.
To enable certain notices and returns to be submitted electronically, HMRC launched an online form in 2018 and an application programming interface (API) in 2021.
HMRC has continued to accept Corporate Interest Restriction notices and returns through a number of different channels. This has led to duplication of effort for customers unsure of the best submission route, inefficiencies for HMRC in processing the submissions, and an increased risk that errors will remain undetected. Limiting the permitted channels will address these issues.
Detailed proposal
Operative date
The regulations will come into force on 1 September 2022.
The regulations will apply to all submissions of the specified notices and returns, including those relating to periods of account ending before 1 September 2022.
Current law
The Corporate Interest Restriction administrative provisions are included in Schedule 7A to the Taxation (International and Other Provisions) Act 2010.
These regulations apply powers conferred by paragraph 3 of that schedule and by sections 135 and 136 of the Finance Act 2002.
Proposed revisions
The regulations provide that the following notices and returns may only be delivered electronically by methods approved by HMRC:
• appointments of a reporting company
• revocations of an existing reporting company
• interest restriction returns
• revised interest restriction returns
The approved methods are specified in HMRC directions referred to by the regulations.
Summary of impacts
Exchequer impact (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts with the Office of Budget Responsibility’s indirect effects process. This will apply where, for example, a measure affects inflation or growth.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on an estimated 6,800 groups that are potentially within scope of the Corporate Interest Restriction regime. One-off costs will include familiarisation with the change and upskilling staff. There are no continuing costs anticipated.
Overall, this measure is expected to improve business’ experience of dealing with HMRC as data collection will be automated, cutting out the potential for human error and duplicate data.
This measure is not expected to impact civil society organisations.
Operational impact (£m) (HMRC or other)
The HMRC operational impacts for this change are anticipated to be negligible.
Guidance contained within the Corporate Finance Manual will be updated.
The GOV.UK website pages applicable to Corporate Interest Restriction will be updated.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through information collected in respect of electronic submissions and through regular communication with affected taxpayer groups.
Further advice
If you have any questions about this measure, please contact Jackie Phillips at financialproductsbai@hmrc.gov.uk.
Declaration
The Rt Hon Lucy Frazer QC MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.