Corporation Tax Act 2009 section 698D

Examples of results that may indicate exclusion not applicable

Section 698D provides illustrative examples of outcomes that may suggest a company's derivative contract arrangements should not benefit from the safe harbour exclusion and could therefore be treated as relevant avoidance arrangements subject to counteraction under the anti-avoidance rules.

• Arrangements that reduce taxable profits from derivative contracts below the economic profits actually arising, or that create or inflate tax losses where no real economic loss exists, may indicate the safe harbour exclusion does not apply.
• Delaying or preventing the recognition of profit or loss items in accounts, or securing a different accounting treatment for a derivative contract by virtue of another transaction within the arrangements, are further indicators.
• Claiming a tax debit for an exchange loss or fair value loss in circumstances where a corresponding gain would not produce an equivalent credit, or would produce a smaller one, is also a warning sign.
• These indicators are only relevant if it is reasonable to assume that the result in question was not the outcome anticipated by Parliament when the relevant derivative contracts legislation was enacted.