Clause 34 - Payments of excessive interest etc
Finance Bill
4:00 pm
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The thin capitalisation rules disallowed excessive interest paid between companies in the same group if the amount of the loan exceeded the amount that could have been borrowed from an unconnected lender, or if the rate of interest were too high. Those rules have been in operation for some time, and companies' understanding of what is meant by ''excessive'' will still apply. Even if interest is charged at an excessive rate within the understood operation of the thin capitalisation rules, if the group as a whole could have coped with that amount of interest, the guaranteed rules that we have introduced may apply to remove the problem. Nothing really changes. The position is the same as it would have been under the thin capitalisation proposals. The
clause puts in place within transfer pricing the ability to deal with such loans.