CFM39010 - Loan relationships: tax avoidance: overview of other anti-avoidance rules

Other anti-avoidance rules

The ‘unallowable purposes’ rule at CTA09/S441 (CFM38100), the rules on non-arm’s length transactions (CFM38400) and the regime anti-avoidance rule (CFM38600) are the key anti-avoidance legislation within the loan relationships regime.

Guidance on the following provisions can also address avoidance concerns:

• The ‘disguised interest’ rules (CFM42000) are a successor to the ‘shares as debt’ rules (CFM45000).
• The ‘transfers of income streams’ rules (CFM77000).
• ‘Late-paid’ interest (CFM35800).
• Company migration (CFM33250).
• ‘Structured finance arrangements’ or ‘factoring’ legislation (CFM73000).
• Use of schemes to hedge index-linked gilt-edged securities (CFM39100).
• Amounts not fully recognised for accounting purposes ({CFM39200}).
• Group mismatch schemes (CFM77500).
• See also the guidance on rules explained in the International Tax Manual (INTM). Note that many of the rules explained in the INTM apply to domestic transactions as well as cross-border situations.

Repealed rules

The following rules to address specific instances of avoidance have been repealed:

• ‘Tax relief schemes’, which involve artificial payments of interest where the ‘sole or main benefit’ is to obtain tax relief - rules which pre-date the loan relationships legislation in FA96 (CFM39020);
• Connected parties deriving benefit from creditor relationships (CFM39035);
• Schemes that obtain a tax advantage from ‘resetting’ interest rates - so-called ‘reset bonds’ and ‘mirror bonds’ (CFM39040);
• Disposals for consideration not fully recognised by accounting practice (CFM39080).
• ‘Hybrid securities’ issued between connected companies (CFM39090).