Corporation Tax Act 2009 section 404

Restriction on deductions etc relating to FOTRA securities

Section 404 prevents companies from claiming tax deductions or losses on FOTRA securities where the profits from those securities are already exempt from corporation tax.

• FOTRA (Free of Tax to Residents Abroad) securities are certain government securities whose profits are exempt from corporation tax for qualifying companies under section 1279 of CTA 2009.
• A company that beneficially owns a FOTRA security and qualifies for the profits exemption cannot bring into account any amounts relating to changes in the security's value.
• The company is also barred from claiming any debit in respect of the loan relationship represented by the security, including holding costs and transaction expenses.
• The restriction ensures symmetry: if profits on a FOTRA security are tax-exempt, then losses and expenses on the same security cannot be used to reduce taxable profits.