Corporation Tax Act 2010 section 938Q

Meaning of "scheme loss" and "scheme profit"

Section 938Q defines what counts as a "scheme loss" or "scheme profit" for the purposes of the tax mismatch scheme rules, setting out the conditions that must be met and the two asymmetry tests used to identify losses and profits caught by these provisions.

• A loss or profit is a "scheme loss" or "scheme profit" if it arises from transactions forming part of a tax mismatch scheme, is brought into account as a debit or credit under the loan relationships or derivative contracts rules in CTA 2009, and meets one of two asymmetry conditions.
• The first asymmetry condition is met where the loss or profit affects (or may affect, if the outcome is still uncertain at the period end) the amount of any relevant tax advantage secured by the scheme — and where only part of the loss or profit has that effect, only that part is treated as a scheme loss or scheme profit.
• The second asymmetry condition catches losses or profits that do not themselves affect a relevant tax advantage, but arise from transactions that could have given rise to a loss or profit that would have done so if events had turned out differently.
• References to losses and profits include those arising from interest or expenses, and when testing whether the conditions are met, the rule in section 938O requiring scheme profits and losses to be left out of account must be ignored.