Commentary

D1.796 Loan relationships—Tax mismatch scheme legislation

Corporate tax
Corporate tax | Commentary

D1.796 Loan relationships—Tax mismatch scheme legislation

Corporate tax | Commentary

D1.796 Loan relationships—Tax mismatch scheme legislation

Overview

The tax mismatch scheme legislation is very closely modelled on the group mismatch scheme legislation (see D1.795) and essentially tracks the wording of that legislation, albeit that the wording has been adapted so that it applies on a single company, as opposed to a group, basis. The aim of this legislation is to catch transactions that were entered into in order to circumvent the group mismatch scheme legislation. It is understood that these transactions involved a partnership entering into a loan with a company partner in the partnership and that the scheme sought to exploit the asymmetrical accounting treatment of the loan in the partnership's accounts, as compared to the accounts of the company partner. As is noted at D1.771 where a partnership is a party to a loan relationship, the profits and losses arising in respect of the loan relationship are normally brought into account in computing the loan relationship profits of the partnership's company partners and such profits are apportioned to its company partners by reference to the profit sharing ratio of the relevant accounting period of the partnership.

Like the group mismatch scheme legislation, the tax mismatch scheme legislation applies to disregard profits and losses arising from loan relationships and derivative contracts, to the extent that they are attributable to the scheme. Any amount that is disregarded for the purposes of the tax mismatch scheme legislation may not be brought into account for other tax purposes1. The tax mismatch scheme legislation

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial