Corporation Tax Act 2010 section 110

Restriction on surrender of losses etc. from alternative finance arrangements

Section 110 prevents a company from surrendering amounts as group relief where those amounts have already been denied as a tax deduction because an alternative finance arrangement was not made on arm's length terms.

• This section applies where a company has been denied a deduction under section 520 of CTA 2009, which deals with non-arm's length alternative finance arrangements
• Alternative finance arrangements are Sharia-compliant financial products that replicate the economic effect of conventional lending but are structured differently
• If the relevant return (the finance cost equivalent) on such an arrangement is non-deductible because the terms were not at arm's length, the disallowed amount cannot be passed to another group company as group relief
• The restriction ensures that a tax benefit denied to one company cannot be obtained indirectly by surrendering the amount to a fellow group member