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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate debt: tax mismatch schemes: the second asymmetry condition

If it becomes clear that a scheme will not produce a relevant tax advantage, despite being a TMS, the second asymmetry condition in CTA10/S938Q (5) applies. The condition is that the loss or profit:

  • does not meet the first asymmetry condition, but
  • arises from a transaction, or series of transactions, that might (if events had turned out differently) have given rise to a loss or profit that would have done so.

This rule covers those schemes where it becomes apparent, most probably towards the end of the scheme’s period, that no relevant tax advantage will arise even though in earlier accounting periods the presumption was that such an advantage would arise. In that case, scheme losses (possibly also scheme profits) will have been disregarded in those earlier periods, but it would not, without CTA10/S938Q(5), be possible to disregard the later events (most likely scheme profits) since in that period there are no scheme profits or losses.