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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate debt: group mismatch schemes: application of the conditions

The tests in condition A and B are both carried out by reference to:

  • a company’s purpose in being party to a scheme, or
  • what that scheme is practically certain to achieve.

A scheme that, in fact, does not produce a relevant tax advantage may still be a GMS. Equally a scheme which does ultimately produce a relevant tax advantage may not be a GMS.

It is unlikely that a standard intra-group loan or derivative would meet either condition A or B. Where UK GAAP is the measure of taxable profits then companies within a group are likely to bring amounts into account symmetrically.

If profits or losses are computed using specific tax rules that require departure from UK GAAP, for example, for the write off and release of a connected party loan, then in standard cases these rules are likely to give rise to symmetrical credits and debits.