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HMRC internal manual

International Manual

Arbitrage: legislation and principles - Introduction: What legislation was introduced & the periods affected

What legislation was introduced

F2A05/SCH3/S24-31 were introduced with effect from 16 March 2005 and are targeted against contrived arrangements that are intended to avoid UK tax through the use of tax arbitrage. There are separate rules dealing with deductions and receipts.

For both receipts INTM595500 and deductions INTM595000, the legislation will apply only if the Commissioners of HM Revenue and Customs issue a notice directing a company to make or amend its self-assessment taking into account this legislation. Details of the procedure by which notices are issued and enquiries undertaken are included in INTM596510, INTM596520, INTM596530 and INTM596540.

It is considered that the anti-arbitrage legislation will not apply to most companies, nor to the majority of transactions undertaken by companies.

Periods affected

The legislation applies to deductions and receipts arising or accruing on or after 16 March 2005.

However, where the amounts arise or accrue from a scheme that is in place on 16 March 2005 and that is terminated by 31 August 2005, the legislation does not apply to schemes involving deductions that do not involve connected parties. For this purpose, two companies are connected if one controls the other or if they are under common control (as defined in CTA10/S1122).