OT22053 - Interest and Financing

Thin Capitalisation. OECD Report

No cases have gone to the Courts in the UK on thin capitalisation.

In 1987 the Committee on Fiscal Affairs of OECD published a report titled "Thin Capitalisation". The report supported the proposition that the application of thin capitalisation rules should accord with the arm’s length principle as delineated in Article 9(1) of the OECD Model Convention (Model DTA). There are no reservations entered by the UK on the conclusions of the report and companies may thus reasonably suppose that OTO’s policy will be in line with the report’s recommendations.

OTO liaises with colleagues in other areas of International who have considerable experience of negotiated settlements over a range of industries excluding oil and who may be consulted about features of DTAs or particular loan agreements. OTO also has its own bank of information which is more directly relevant to the oil industry.