June Budget – Loan relationships – Anti Avoidance
Further anti-avoidance legislation is being introduced affecting large companies involved with the derecognition of income from loan relationships and derivative contracts. The new rules are being tightened up for credits and debits arising on or after 22 June 2010.
This measure is designed to tackle avoidance schemes that have been notified to HMRC under the avoidance disclosure rules. In certain cases, the profits arising to a company from a financial asset are said to fall out of account for tax purposes as a result of the ‘derecognition’ of a loan or derivative.
This meant that it was possible for large companies to avoid tax on income arising from some loan relationships and derivative contracts.
HMRC are also set to shortly publish a technical note with their proposals for generic legislation to tackle avoidance schemes involving derecognition of loan relationships and derivative contracts.