Corporation Tax Act 2010 section 937C

Meaning of "risk transfer scheme"

Section 937C defines what constitutes a "risk transfer scheme" for corporation tax purposes, setting out three conditions that must all be met and explaining the key terms "relevant risk" and "financial advantage".

• A scheme involving a company is a risk transfer scheme only if all three conditions relating to purpose, risk elimination and the role of tax legislation are satisfied.
• The scheme must be motivated by obtaining a financial advantage that could not be achieved without exposure to a relevant risk, such as the risk of economic losses from fluctuations in exchange rates, price indices or other values.
• The scheme must result in the group either avoiding the relevant risk entirely or bearing only a negligible proportion of it, and this outcome must depend on the operation of the Corporation Tax Acts.
• A financial advantage means the scheme increases investment returns, reduces borrowing costs, or produces an economically equivalent effect when assessed across the whole group.