Corporation Tax Act 2010 section 768

Certain tax consequences not to have effect

Section 768 prevents certain favourable tax consequences from arising for existing partnership members where a type 3 finance arrangement is in place and a relevant change to the partnership would otherwise reduce their tax liability.

• Where a type 3 finance arrangement exists and a relevant change to the partnership would otherwise produce a tax benefit for existing members (other than the lender), this section blocks that benefit from taking effect.
• The blocked tax benefits include: income escaping a corporation tax charge, amounts being excluded from the corporation tax income calculation, or a member becoming entitled to an income deduction (whether a deduction in calculating income or a deduction from total profits).
• A "relevant member" is any partner who was a member of the partnership immediately before the relevant change occurred, excluding the lender — so the provision protects the Exchequer against existing members gaining unintended tax advantages through the arrangement.
• When this section applies, the partnership tax rules in sections 1259 to 1265 of CTA 2009 operate as though the relevant change to the partnership had never occurred, so each relevant member's tax position remains unchanged.