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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Debt cap: anti-avoidance rules: main rules: excluded schemes: general

Where the scheme meets certain conditions the scheme is an excluded scheme

Condition C within TIOPA10/S307(4) is not met if the scheme is an excluded scheme.

Examples of the types of schemes that could be excluded from the anti-avoidance rules are below. It is likely that some groups will not be subject to the anti-avoidance rules in any case if the scheme passes the main purpose test, see CFM92630. Regulations have not been laid for any excluded schemes. CTIAA (Financial Products Team) would welcome full details of any of the types of scheme outlined below or other transactions that are considered could be excluded schemes for potential inclusion in regulations. The team can be contacted at the following address:

HMRC, CTIAA (Financial Products Team), 3rd Floor, Mail Station E, 100 Parliament Street, London SW1A 2BQ

Repaying debt with surplus cash

A relevant group company repays, in whole or in part a relevant liability using cash generated from its own business activities or cash generated from its investments. Cash generated from investments might be from dividends from a subsidiary or from the sale of an investment.

Repaying debt with proceeds from the repayment of a loan asset

A relevant group company has a loan asset (a loan made to another group company or third party, or money placed on deposit) that is repaid, in whole or in part and the company uses the proceeds to repay, in whole or in part a relevant liability.

Debt waiver

A relevant group company has a relevant liability that is waived by the creditor so the debt is extinguished in whole or in part, provided that the waiver is on arm’s length terms.


A relevant group company has a relevant liability that is repaid using new consideration from the issue of ordinary share capital.

Repayment of an upstream loan

A relevant group company has a relevant liability, and the other party is a subsidiary, and the relevant liability is repaid by the subsidiary paying a dividend to the relevant group company.

For each excluded scheme there are some common conditions that will apply

In each case the relevant liability must not be replaced, in whole or in part, with any arrangement that

  • provides a UK group company with a similar deduction that it takes into account in calculating its profits for corporation tax purposes, and
  • is structured so that the arrangement does not constitute a relevant liability

This condition ensures that the relevant liability in question is not replaced with something similar that would not be treated as a relevant liability.

In addition, in each case, the scheme is treated as an excluded scheme only to the extent of the amount of relevant liability that is repaid or forgiven and not replaced.