The property industry is urging government to defer the implementation of measures to reduce the tax deductibility of debt to 2018 in the wake of post-referendum uncertainty.
Adoption of the OECD’s initiative to tackle base erosion and profit shifting were announced in the March Budget and are due to take effect in April 2017.
BEPs is a system to counter offshore tax avoidance. It is designed to stop multinationals shifting profits between different jurisdictions in order to take advantage of the lowest tax rates.
However, restricting the tax deductibility of debt will increase the cost of debt finance and the British Property Federation said it will significantly harm the property industry.
Industries like property and infrastructure industries are heavily reliant on debt funding which is not used for the purposes of tax evasion.
In its response to a Treasury consultation on the proposals, the BPF has warned that government should not introduce new rules unless it is clear they will not harm investment in capital intensive industries.
The BPF suggests that all genuine third party debt should be tax deductible as it poses a low risk of tax avoidance and that as an absolute minimum there should be safeguards for debt which represents very low tax avoidance risk, such as debt secured against property and infrastructure in the UK.
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