What are compensating adjustments for thin capitalisation purposes?

Compensating adjustments are a means of restoring the neutral position across the UK tax net.

They are available to the lender where the borrower has suffered a disallowance and there would otherwise be double taxation (no deduction for the borrower, but the lender taxed on the receipt) (see this page).

They may also be available to UK guarantors, where the borrower has had interest disallowed and the guarantors can claim that they could have carried some part of the debt concerned (INTM413160).

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