Loan relationships – anti-avoidance
HMRC have published two new pieces of guidance on the corporation tax anti-avoidance rules for large companies involving corporation tax loan relationships and derivative contracts.
The first piece of draft guidance relates to changes to the loan relationships and derivative contracts rules on amounts not fully recognised for accounting purposes. 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. The new guidance summarises the changes made in Finance Bill 2011.
The second piece of guidance relates to changes to the corporation tax rules on loan relationships and derivative contracts that apply to group mismatches. The guidance summarises the significant changes that have been made in the legislation to be published in Finance Bill 2011. The legislation has been drafted to counter financial products avoidance schemes involving group mismatch schemes.