Corporation Tax Act 2009 section 455A

Debits arising from derecognition of creditor relationships

Section 455A prevents companies from claiming tax debits when they derecognise a creditor relationship as part of tax avoidance arrangements, while still remaining a party to that relationship.

• Where a company enters into tax avoidance arrangements that result in the derecognition of a creditor relationship under generally accepted accounting practice, no tax debit arising from that derecognition may be brought into account for corporation tax purposes.
• The blocked debit cannot be claimed under any other corporation tax provision either — if an amount is disallowed under this rule, it is treated as though it has already been dealt with under the loan relationships rules, preventing it from being used elsewhere.
• A company is still treated as a party to a creditor relationship even if it has disposed of its rights through a repo, stock lending arrangement, or a transaction treated as not involving a disposal under the chargeable gains rules on mortgages and charges.
• Arrangements are considered tax avoidance arrangements if the main purpose, or one of the main purposes, of any party entering into them is to obtain a tax advantage, and this covers any scheme or understanding, whether legally enforceable or not.