»Ê¹ÚÌåÓýapp

Anti-avoidance legislation was introduced by FA11/S30/SCH5 to cancel the tax advantages arising from asymmetries within groups of companies relating to amounts brought into account for the purposes of the loan relationships and derivative contracts rules in CTA09/Part 5 and Part 7. This legislation has been incorporated in CTA10/S938A to S938N.

Group mismatches may arise where a financial instrument (for example, a loan) is between two companies in the same group. »Ê¹ÚÌåÓýapp value of corporation tax relief to which the loan gives rise in the debtor company may exceed the corporation tax charge (if any) in the creditor company. As a result transactions that are economically neutral at group level reduce the group’s effective rate of corporation tax.

»Ê¹ÚÌåÓýapp mismatch may be the result of differing accounting treatments for the financial instrument, or differing tax treatment in the companies, or both. »Ê¹ÚÌåÓýapp tax advantage may also be one of timing.

»Ê¹ÚÌåÓýapp Group Mismatch Scheme (‘GMSâ€�) rules are an instance of principles-based legislation and are intended to counter such avoidance generally. »Ê¹ÚÌåÓýappy apply where two or more companies are members of a group and are party to a group mismatch scheme, where the scheme is either

• entered into to obtain the chance of securing a ‘relevant tax advantageâ€�, or
• where the scheme is ‘practically certainâ€� to secure such an advantage.

Effect of GMS rules

Where the conditions of the GMS legislation are met, the GMS rules must be applied to remove any tax advantage that would otherwise arise from the group mismatch scheme (CTA10/S938A(2). »Ê¹ÚÌåÓýapp GMS rules do not create a tax disadvantage.

See CFM77520 for a more detailed overview of the legislation.

Commencement

»Ê¹ÚÌåÓýapp legislation will have effect in relation to arrangements whenever entered into but the only amounts disregarded under CTA10/S938A are scheme losses and profits arising on or after 19 July 2011 (the commencement date).

Repealed legislation

As a result of the group mismatch rules, CTA09/S418 (CFM37730 onwards) and CTA09/S453 (CFM39035) have been repealed in relation to loan relationships to which a company is party on or after commencement day, but not so as to affect the taxation of amounts that relate to any time before that day.