17 September 2002

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UK Thin Capitalisation rules may be in breach of EC Law

The European Court of Justice ("ECJ") has handed
down its decision in Lankhorst-Hohorst GmbH v
Finanzamt Steinfurt, which was concerned with
whether Germany's thin capitalisation rules were in
contravention of Article 43 EC Treaty. The ECJ has
ruled that the German legislation was in conflict with
Article 43. This has important implications for the
legality of the UK's thin capitalisation legislation
reflected in the fact that the UK (along with Germany
and Denmark) submitted its views to the ECJ.

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