Corporation Tax Act 2010 section 269DN

Profit and loss shifting to avoid or reduce surcharge liability

Section 269DN is an anti-avoidance provision that prevents banking companies from artificially shifting profits or losses between themselves and non-banking companies in order to avoid or reduce the bank surcharge.

• Where arrangements exist whose main purpose (or one of their main purposes) is to avoid or reduce the bank surcharge, and those arrangements result in a "relevant transfer", the surcharge profits are recalculated as if the transfer had never taken place.
• A "relevant transfer" occurs where, in substance, all or a significant part of a banking company's surcharge profits are transferred to a non-banking company, or where a loss or deductible amount is transferred from a non-banking company to the banking company so as to eliminate or significantly reduce the banking company's surcharge profits.
• "Arrangements" is defined very broadly — it covers any agreement, understanding, scheme, transaction or series of transactions, whether or not they are legally enforceable.
• A "non-banking company" is a company that is neither a banking company nor a controlled foreign company (CFC) in relation to which a banking company is the chargeable company, at any time when the arrangements have effect.