Corporation Tax Act 2010 section 938C

Meaning of "scheme loss" and "scheme profit"

Section 938C defines what counts as a "scheme loss" or "scheme profit" for the purposes of the group mismatch scheme rules, setting out the conditions that must be met and the two asymmetry tests used to identify relevant amounts.

• A loss or profit is a scheme loss or scheme profit if it arises from transactions forming part of a group mismatch scheme, is brought into account as a debit or credit under Part 5 or Part 7 of CTA 2009, and meets either the first or second asymmetry condition.
• The first asymmetry condition is that the loss or profit affects the amount of the relevant tax advantage secured by the scheme — and even where it is uncertain at the period end whether a relevant tax advantage will arise, the condition is treated as met if there is a chance it will and the loss or profit would affect its amount.
• Where only part of a loss or profit meets the first asymmetry condition, only that part is treated as a scheme loss or scheme profit — for example, any portion referable to genuine third-party transactions is excluded because it cannot create intragroup asymmetries.
• The second asymmetry condition is a backstop: it catches a loss or profit that does not meet the first condition but arises from transactions that could have given rise to a loss or profit that would have done so, ensuring that offsetting amounts are also left out of account even when a scheme ultimately fails to produce a relevant tax advantage.