Introduction Background Note
214.In the 2008 Pre-Budget Report, the Government announced a package of reforms to the taxation of companies on their foreign profits, to be introduced in Finance Bill 2009. The package includes the introduction of a measure to restrict the interest and other finance expense that can be deducted in computing the corporation tax payable by the UK members of a worldwide group of companies. In broad terms, the measure limits the UK tax deduction for intra-group finance expense to the external gross finance expense of the worldwide group of companies.
215.Draft legislation covering the interest restriction and other elements of the foreign profits package was published for consultation on 9 December 2008. The consultation period ran until 3 March 2009. Updated draft legislation with additional guidance notes to deal with particular exclusions from the worldwide debt cap measure was published on 26 January 2009. The legislation included in the Finance Act has been amended reflecting comments on the draft released for consultation.