Company Anti-Avoidance / Loan Relationships - Mazars - United Kingdom
Company Anti-Avoidance / Loan Relationships
HMRC have been aware that some large companies have been using certain accounting peculiarities of UK GAAP (generally accepted accounting practice) in relation to accounting for financial instruments in such a way as to avoid paying corporation tax.
Most of these avoidance schemes were based on de-recognition of a financial instrument removing a previously recognised financial asset from the balance sheet. This results in profits not being recognised in a company’s income statement or statement of recognised gains and losses.
As a company’s taxable profits and taxable losses from its loan relationships and derivatives are normally based on the amounts shown in its financial statements, such non-recognition of profits gives the company a corporation tax break.
From 22 June 2010, the tax rules will override the accounting practice and require any de-recognised profits to be fully brought in to charge for corporation tax purposes.
It is the intention that HMRC will issue a technical note in early July 2010 setting out proposals for generic legislation to tackle avoidance schemes using de-recognition of financial instruments.
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- Copyright 2012 - Mazars - United Kingdom
