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HMRC internal manual

Corporate Finance Manual

Debt cap: anti-avoidance rules: general: requests for clearances

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Dealing with requests for pre or post transaction clearances

There is no formal clearance process for the debt cap anti-avoidance rules. However there is an existing process under which large businesses may apply for a non-statutory clearance for a scheme that has already been implemented, or transactions that are intended to be implemented (provided there is evidence that there is a genuine intention to implement the scheme). An application can only be made where there is material uncertainty and the issue is commercially significant.

HMRC guidance sets out that process and explains that clearance applications will not be accepted where HMRC take the view that the arrangements have been entered into primarily to gain a tax advantage. Similarly an application to effectively endorse or comment on successive iterations of tax planning will not be accepted. Nor will we comment on a clearance when it involves agreeing the main purpose or one of the main purposes of a scheme. This is because the purpose of a scheme may change over the course of planning, so the position outlined in a clearance application may not be the final position once the scheme is concluded. There may also be changes to a scheme so that the main purpose needs to be re-considered.

Establishing the main purpose or purposes of a scheme is a question of fact and at the time the clearance is made not all of the facts will be available because the facts described in the clearance may change over the course of the scheme. Purpose is a subjective concept and the parties to the transactions and their advisers will have a clearer understanding of the purpose of the scheme. Also because the anti-avoidance rules apply to all parties in a scheme it is possible that the company or group applying for clearance may not be aware that another party to the scheme has a main purpose that falls within the anti-avoidance rules, an example is given in CFM92635.

For these reasons a clearance for main purpose can only realistically say that as long as the scheme as presented does not have as its main purpose or one of its main purposes the:

  • Securing that the period of account of the worldwide group is not within TIOPA10/S261(1);
  • Securing that the amount of the relevant net deduction is lower than it would have been if that amount were calculated in accordance with TIOPA10/S309; or
  • Securing that any of the conditions in TIOPA10/S299 (2) - (4) are met in relation to the financing income amount.

then it can be accepted that the scheme does not fall within Chapter 6. It should also be made clear that HMRC may examine all the circumstances around the scheme after it has happened and if the main purposes or one of the main purposes of the scheme is as described in the bulleted list above then the scheme will be within the anti-avoidance provisions.

This remains the position for periods after the Excluded Schemes Regulations in SI2013/2892 came into effect.

Otherwise clearance applications by business should be considered where there is real uncertainty that transactions or arrangements could be caught by the debt cap anti-avoidance rules and the transaction(s) is not intended to frustrate the debt cap rules. An application asking for a non-statutory clearance in respect of a transaction(s) should be refused where there is clear guidance indicating it would not be subject to the anti-avoidance rules.

The CCM for the group will be responsible for dealing with any such applications although the Financial Products Team in BAI will be able to provide advice in cases of particular difficulty.