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HMRC internal manual

Corporate Finance Manual

Loan relationships: tax avoidance: overview of other anti-avoidance rules

Other anti-avoidance rules


The ‘unallowable purposes’ rule at CTA09/S441 (CFM38100), the rules on non-arm’s length transactions (CFM38400) and the regime anti-avoidance rule ({CFM38600}) are the key anti-avoidance legislation within the loan relationships regime.

Guidance on the following provisions can also address avoidance concerns:

  • The ‘disguised interest’ rules (CFM42000) are a successor to the ‘shares as debt’ rules (CFM45000).
  • The ‘transfers of income streams’ rules (CFM77000).
  • ‘Late-paid’ interest (CFM35800).
  • Company migration (CFM33250).
  • ‘Structured finance arrangements’ or ‘factoring’ legislation (CFM73000).
  • Use of schemes to hedge index-linked gilt-edged securities ({CFM39100}).
  • Amounts not fully recognised for accounting purposes ({CFM39200}).
  • Group mismatch schemes (CFM77500).
  • See also the guidance on rules explained in the International Tax Manual ({INTM}). Note that many of the rules explained in the INTM apply to domestic transactions as well as cross-border situations.

Repealed rules

The following rules to address specific instances of avoidance have been repealed:

  • ‘Tax relief schemes’, which involve artificial payments of interest where the ‘sole or main benefit’ is to obtain tax relief - rules which pre-date the loan relationships legislation in FA96 (CFM39020);
  • Connected parties deriving benefit from creditor relationships (CFM39035);
  • Schemes that obtain a tax advantage from ‘resetting’ interest rates - so-called ‘reset bonds’ and ‘mirror bonds’ (CFM39040);
  • Disposals for consideration not fully recognised by accounting practice (CFM39080).
  • ‘Hybrid securities’ issued between connected companies ({CFM39090}).