Corporate Interest Restriction (CIR) Calculator — Fixed Ratio Rule

CIR is a UK tax rule that limits how much net interest expense large groups can deduct against taxable profits. Introduced from 1 April 2017, it replaced the old Worldwide Debt Cap rules. CIR implements OECD BEPS Action 4 and aims to prevent multinationals from loading UK companies with debt to shift profits offshore through interest payments.

CIR applies to any single company or group with net UK interest expense exceeding £2 million per year. Large UK-only companies and multinational groups with UK operations can all be affected. The £2 million de minimis means smaller businesses are not affected.

The Fixed Ratio Rule (FRR) allows deduction of up to 30% of 'tax-EBITDA' (earnings before interest, tax, depreciation, and amortisation, calculated on a UK tax basis). If net interest expense exceeds 30% of tax-EBITDA, the excess is disallowed. This is the default rule.

The Group Ratio Rule (GRR) allows groups with a higher worldwide net-interest-to-EBITDA ratio to deduct more interest in the UK. If the worldwide group's ratio exceeds 30%, the GRR can increase the UK deduction. This benefits highly-leveraged groups (e.g., private equity-backed companies) where the debt is genuinely financing group activities.

Disallowed interest under CIR is carried forward indefinitely as a 'disallowed amount' and can be deducted in future years when the group has spare interest capacity (i.e., when interest expense is below the CIR limit). Groups can also carry forward unused capacity for up to 5 years.

Groups with net interest exceeding £2 million must designate a 'reporting company' to file an interest restriction return (IRR) with HMRC. This return allocates any disallowance across group members and claims deductions. The IRR must be submitted within 12 months of the end of the period of account.

Banks and insurance companies have modified CIR rules. Certain 'excluded entity' types may be outside CIR, or may be within a 'financial services exclusion'. The rules for financial sector groups are more complex — specialist advice is essential for these sectors.

CIR disallows interest deductions at the company level. The disallowed amounts are then carried forward at company level. Group relief can still be used for other losses and deficits — CIR doesn't affect group relief itself, but the interaction between the two regimes can be complex in practice.

Certain public benefit infrastructure (PBI) companies — such as utilities, toll roads, railways — can claim an exemption from CIR. PBI companies must be regulated, operating in the public interest, with assets used substantially for public benefit. This exemption allows such companies to deduct more interest than the standard FRR allows.

Private equity buyouts are typically highly leveraged, with UK operating companies carrying significant debt. CIR can restrict interest deductions on this debt, increasing CT. The Group Ratio Rule is often more beneficial for PE-backed groups as it reflects the worldwide leverage ratio rather than an arbitrary 30% cap.

Relevant expense amounts include: interest on loans, bonds, and other financial instruments, economically equivalent amounts (e.g., finance lease charges, certain derivative costs), and fair value movements on financial instruments. They are the gross interest expense before netting off income.

Yes. The reporting company must allocate CIR disallowances across group members in the interest restriction return. The allocation follows specific rules — disallowances are primarily allocated to companies with the highest net interest deductions. The reporting company has some flexibility in the allocation within the rules.