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HMRC internal manual

Corporate Finance Manual

Debt cap: anti-avoidance rules: general: excluded schemes

Excluded schemes, set out in Regulations, will form a filter for the anti-avoidance rules

Each of the three sets of anti-avoidance rules within TIOPA10/PT7/CH6 has a second filter (in addition to the main purpose filter) which consists of a set of excluded schemes. The intention is to define particular schemes undertaken substantially for commercial purposes or which form part of a group’s normal and acceptable tax planning, but also have an effect on the debt cap position. Exclusions will provide a ‘safe harbour’, so it will not be necessary for groups to consider in detail whether or not the ‘debt cap purpose’ is a main purpose.

Regulations will set out the details of particular excluded schemes. If a scheme meets the conditions for an excluded scheme then the anti-avoidance rules do not apply to that scheme. The conditions may consist of particular hallmarks or require an assessment of the outcome of the scheme, or a mixture of both.

As information is built up about the debt cap the Regulations may be amended to include new excluded schemes.

A scheme will only be considered as an excluded scheme where the totality of the scheme falls within the particular conditions. The excluded schemes Regulations cannot be applied to individual or even multiple elements of a scheme, where the scheme includes other elements.

If a scheme is a disclosed avoidance scheme under sections 309 to 319 FA 2004 then it cannot be an excluded scheme.

Until ‘excluded schemes’ Regulations are laid, HMRC will not seek to apply the Chapter 6 anti-avoidance rules to arrangements that are given in this guidance as examples of schemes that are likely to be excluded.