The UK Government have released controversial proposals that will limit tax deductibility of interest, which could mean an additional spending expenditure of £670 million each financial year for the housing market. This is the equivalent of the creation of 9,500 jobs in the construction sector.
The British Property Federation (BPF) has conducted the research on what the additional spending will amount to. The interest restriction was originally a recommendation from the OECD (Organisation for Economic Co-Operation and Development) as one of the BEPS project in order to stop tax avoidance by corporations.
The new fixed ratio regulation will mean that tax assistance for any interest will have an upper limit of 30%. This includes all profit related to corporation tax, excluding interest. As well as tax depreciation such as capital allowances, tax remuneration, and any relief for losses brought forward or carried back that have been claimed.
This has been protested by experts in the property and housing industry. The BPF have stated they have put forward their reservations in the hope that the government will realise the negative effects the reforms will have. Practical examples from real projects are likely to be particularly persuasive. The final decisions will close on August 4th.