D1.736 Loan relationships—Anti-avoidance and matching
The measures that are discussed in this article were repealed with effect for arrangements entered into on or after 18 November 2015. See 'Disposal consideration not fully recognised for accounting purposes (disposals before 18 November 2015)' at D1.724.
It is not possible for an exchange gain or loss arising on a loan relationship or a currency contract to be treated as matched under the provisions that have been discussed at D1.732–D1.735 above where it forms part of an arrangement between connected companies that is designed to achieve one-way matching.
To explain this anti-avoidance provision it is necessary to look at how matching is often structured within groups of companies.
Typically the company seeking matching treatment (matching company) will borrow from or enter into a currency contract with a connected company (and in certain cases there may be a chain of loans or currency contracts between connected companies ending ultimately with the matching company). In such cases if an exchange gain arises to the matching company on a group basis this would enable the group to obtain relief for the exchange loss arising on the corresponding creditor loan relationship or the corresponding currency contract (or in the case of a chain of companies to the final company in the chain). Equally, however, if an exchange loss arises to the matching company this would be treated as matched whereas the corresponding exchange gain arising elsewhere in the group would be taxable. Groups of companies had been entering into arrangements which