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HMRC internal manual

Corporate Finance Manual

From
HM Revenue & Customs
Updated
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Loan relationships: tax avoidance: index-linked gilt-edged securities: overview of legislation

Overview of Legislation

The legislation ensures that where companies, or groups of companies, enter into transactions that involve index-linked gilt-edged securities but the company or group is not economically exposed to the inflationary aspect of holding the index-linked gilt-edged security then the tax exemption by virtue of CTA09/S400(2) will not apply.

Referring to the example at CFM39120 this would mean that the £400m return that relates to the increase in carrying value due to movements in the RPI would not qualify for the tax exemption. The tax position of a £500m taxable credit and a £500m tax deduction would match the economic position for the company.