Corporation Tax Act 2010 section 938J

Schemes involving finance arrangements

Section 938J extends the group mismatch rules so they can apply to certain finance arrangements (type 1, 2 or 3) where the borrower receives the advance from another member of the same group.

• The section applies where a scheme includes a type 1, 2 or 3 finance arrangement in which a group member is the borrower and the advance comes, directly or indirectly, from another group member.
• These finance arrangements are treated as loan relationships only by the borrower, so the group mismatch rules need special provision to test whether the corresponding income is being taxed symmetrically.
• The symmetry test looks not only at amounts under the loan relationship rules (Part 5 of CTA 2009) but also at amounts taxed under any other corporation tax on income provision that applies to the repayment of the advance.
• The term "repayment of the advance" refers to the specific payments described in condition A of sections 758, 763 or 767 of CTA 2010, which define the three types of finance arrangement.