The European Court of Justice (ECJ) has ruled that 'thin capitalisation' rules constitute a restriction on 'freedom of establishment'.
The case relates to laws that look to limit debt-financing, whereby a company can help out its subsidiaries financially, in some cases to avoid paying certain taxes.
The court found that debt-financing arrangements involving parent and subsidiary companies that are conducted on commercial terms on an arm's length basis should be acceptable to the UK tax authorities, but that UK subsidiaries should not be overly leveraged.
KPMG UK's head of international corporate tax, Chris Morgan, called the decision "very practical".
He added: "Taxpayers should be relieved that, provided they can demonstrate that they could achieve similar terms on the open market, their arrangements will be acceptable to HMRC."
KPMG believes that the decision raises questions as to whether current UK to UK transfer pricing rules are necessary.
"It would be nice if HMRC would consider withdrawing them," said KPMG's Jonathan Bridges. "At the very least, some simplification of the rules would be welcomed or a 'light touch' approach in their application."
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