Tax Allowances: Companies

(asked on 21st July 2021) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the potential merits of restricting tax relief for private equity companies which take over UK-based companies to (a) prevent them from offsetting debt against their corporation tax liability and (b) require them to pay tax on their turnover.


Answered by
Jesse Norman Portrait
Jesse Norman
This question was answered on 10th September 2021

Groups of companies which are owned by private equity funds are subject to the same UK tax rules as other companies. The UK has some of the world’s most comprehensive rules limiting relief for interest. Tax relief is only available for interest on debts incurred for commercial purposes and on arm’s length terms. It is further limited by the Corporate Interest Restriction, introduced from 2017 in line with the OECD-G20 Base Erosion and Profit Shifting project.

Unlike profit taxes, a turnover tax would not take into account businesses’ ability to pay, meaning those with low profit margins would be disproportionately burdened. If applied to all businesses in a supply chain, multiple layers of tax could accrue, the cost of which could be passed onto consumers. Rather than applying a general turnover tax, the UK has a value added tax, VAT, which applies to all companies with taxable turnover over the threshold, including companies owned by private equity funds.

Reticulating Splines