Commentary

D1.795 Loan relationships—Group mismatch scheme legislation

Corporate tax
Corporate tax | Commentary

D1.795 Loan relationships—Group mismatch scheme legislation

Corporate tax | Commentary

D1.795 Loan relationships—Group mismatch scheme legislation

The aim of the group mismatch scheme legislation is to counter transactions that seek to exploit asymmetries in the accounting (and hence) tax treatment of transactions involving loan relationships and derivatives in order to obtain a tax advantage. Where the legislation applies no scheme profit or loss arising from a group mismatch scheme will be brought into account for the purposes of the loan relationships or derivative contracts legislation and nor may such amounts be otherwise brought into account for tax purposes. For HMRC guidance see CFM77500 onwards.

Meaning of group mismatch scheme

A scheme is a group mismatch scheme if1:

  1.  

    •     the parties to the scheme are, or include, members of the same group (see below) and

  2.  

    •     condition A or B is met

In determining whether condition A or B is met the fact that where CTA 2010, s 938A applies any profits or losses arising in respect of the scheme are to be disregarded for tax purposes, is to be ignored2. Further, in determining whether either condition is satisfied it is to be assumed that the parties to the scheme carried it out3. Finally, where at the time that the scheme is entered into the length of the scheme period (defined as the period during which the scheme has effect4) is uncertain, either of these conditions is regarded as being met if it would be met on any reasonable assumption as to the length of the scheme period5.

Condition A is that at the

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