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HMRC internal manual

International Manual

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HM Revenue & Customs
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Controlled Foreign Companies: The CFC Charge Gateway Chapter 9 - Exemptions for profits from Qualifying Loan Relationships: Interaction of Chapter 9 Exemption with the Arbitrage Rules

It is likely that groups will use structures involving hybrid instruments or hybrid entities in conjunction with a finance company in order to minimise tax in the jurisdiction of the finance company (including overseas withholding taxes). This is so that the overall effective rate of the tax on the finance income (both UK and foreign) is minimised. The existence of a hybrid entity or instrument in a structure should not of itself affect the availability of the Chapter 9 finance company exemptions. However a group will still need to consider whether the arbitrage rules will apply and in particular will need to consider what the comparator is for determining whether there is a UK tax advantage under TIOPA10/S234.

Use this link to view example part one

Use this link to view example part two