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HMRC internal manual

Corporate Finance Manual

Loan relationships: connected companies and impairment: debtors: deemed releases of impaired debt: deemed releases on or after 27 February 2012

Deemed releases: Written Ministerial Statement on 27 February 2012

CFM35510 onwards explains the changes that were made in to the deemed release rules in CTA09/S361 as a result of Written Ministerial Statements (WMS) in 2009 in response to arrangements where groups sought to buy back their own debt that was trading at a discount, without suffering a tax charge on the release.

On 27 February 2012 a WMS was made in relation to new avoidance arrangements exploiting the deemed release provisions in CTA09/S362. The WMS announced legislation, enacted in FA12/S23, to counter this avoidance. This legislation has three elements.

First, it amended the operation of CTA09/S362 so that the deemed release under that section is the difference in the pre-connection carrying value in the accounts of the creditor and debtor companies. This is explained in CFM35480.

Second, it inserted a targeted anti-avoidance rule to address arrangements seeking to circumvent either CTA09/S361 or S362. See CFM35590 for more on this.

Third, it contained retrospective provision for arrangements entered into between 1 December 2011 and 27 February 2012. Contact the Financial Products Team if you think this rule is applicable.