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Chapter INTM489605

Document Cited in Related
Vincent
Published date09 April 2016
Record NumberINTM489605
CourtHM Revenue & Customs
IssuerHM Revenue & Customs

An effective tax mismatch outcome is an excepted loan relationship outcome if it arises wholly from either:

  • anything that would produce debits or credits under Part 5 of CTA 2009 if a party to it was within the charge to corporation tax, or
  • a loan relationship and a derivative contract entered into entirely as a hedge of risk in connection with the loan relationship.

The existence of a loan relationship, or loan relationships, within the material provision that gives rise to an effective tax mismatch outcome does not of course automatically mean that the outcome is excepted. It must arise wholly from the loan relationship(s) and/or hedging contract.

Example: Excepted loan relationship rule

Company A is a UK resident company that has a group financing subsidiary resident in a low tax territory. The group financing company is a Controlled Foreign Company within the finance company partial exemption rules.

Company Z (a non-UK resident company in the same group as Company A) requires debt funding for the purposes of its trade. For the last two years Company A has provided this funding through a long-term...

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