Corporation Tax Act 2010 section 765

Certain tax consequences not to have effect

Section 765 prevents certain tax advantages from arising where a type 2 finance arrangement involves a relevant change in relation to a partnership that would otherwise reduce or eliminate the transferor's corporation tax liability.

• Where a type 2 finance arrangement exists and a relevant change in the partnership would produce a tax advantage, the partnership tax rules in CTA 2009 (sections 1259 to 1265) apply as though that change never happened
• The tax advantages blocked include: income escaping a corporation tax charge, income not being brought into account for corporation tax purposes, or the transferor (or a connected person) gaining an income deduction
• When testing whether the tax advantage would arise, it is assumed that income equal to the payments referred to in section 763(2)(e) was payable to the partnership before the relevant change occurred
• An income deduction means either a deduction in calculating income for corporation tax purposes or a deduction from total profits