Financial Product Avoidance: Group Mismatches

The measure

A discussion document has been released proposing a new 'principles-based' anti-avoidance approach to transactions that involve loan relationships and derivatives that give rise to 'group mismatches' - ie where a transaction gives rise to an asymmetry (tax deductible losses versus non-taxable profits) between companies in the same group.

This is a response to the number of schemes notified to HMRC under the tax disclosure rules in respect of loan relationships and derivatives which involve a mismatch between the taxation of two group companies. This tax asymmetry potentially gives rise to a tax advantage for the group where there is no overall corresponding economic loss.