Commentary

D1.847 Amounts not fully recognised for accounting purposes

Corporate tax
Corporate tax | Commentary

D1.847 Amounts not fully recognised for accounting purposes

Corporate tax | Commentary

D1.847 Amounts not fully recognised for accounting purposes

An anti-avoidance provision applies where a company is, or is treated as being, a party to a derivative contract and as a result of tax avoidance arrangements to which the company is at any time a party, an amount is, in accordance with generally accepted accounting practice, not fully recognised for an accounting period in respect of the derivative contract1. An amount is not regarded as being fully recognised in respect of the derivative contract where either no amount is recognised in the company's accounts or an amount is only recognised in respect of part of the contract2.

Arrangements are tax avoidance arrangements if the main purpose, or one of the main purposes, of any party to the arrangements in entering into them, is to obtain a tax advantage3. Arrangements in turn are defined as including any arrangements, scheme or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions4. For the purposes of this provision a company is treated as being a party to a derivative contract even though it has disposed of its rights and liabilities under the contract to another person under a repo or stock lending arrangement, or under a transaction which is treated as not involving any disposal as a result of TCGA 1992, s 26 (mortgages and charges not to be treated as disposals)5. It would be very unusual for a derivative contract to be transferred under a repo

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