What is the UK's thin capitalisation framework?

TIOPA 2010 Part 4 requires UK entities to limit interest deductions on related-party loans to an arm's length amount. HMRC applies the 1.5:1 debt-to-equity benchmark as a starting reference, but the arm's length principle ultimately governs. CIR rules add a further 30% EBITDA cap.

How does the Corporate Interest Restriction (CIR) interact with thin capitalisation?

CIR (TIOPA 2010 Part 10) caps UK group net interest expense at 30% of UK EBITDA or the group ratio (if higher). Even where thin capitalisation is satisfied, CIR may restrict interest deductions if the group's net interest-to-EBITDA ratio exceeds the threshold.

Thin Capitalisation 1.5:1 UK Debt:Equity Test Calculator

Calculate whether related-party debt financing passes the UK thin capitalisation arm's length test under TIOPA 2010 Part 4. Models HMRC's 1.5:1 safe harbour ratio and interest restriction under CIR rules.

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⚖ For informational purposes only. Not legal advice. Consult a licensed attorney for your specific situation.

How to Use

Enter the values for the scenario you are assessing. Calculate whether related-party debt financing passes the UK thin capitalisation arm's length test under TIOPA 2010 Part 4. Models HMRC's 1.5:1 safe harbour ratio and interest restriction under CIR rules. Use the thin capitalisation test result to inform your calculation.

Thin Capitalisation 1.5:1 UK Debt:Equity Test Calculator

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How to Use

Frequently Asked Questions

What is the UK's thin capitalisation framework?

How does the Corporate Interest Restriction (CIR) interact with thin capitalisation?