Finance Act 2008

Avoidance relying on continuity of treatment provisions

5 (1) In paragraph 12 of Schedule 9 to FA 1996 (loan relationships: continuity of treatment), after sub-paragraph (2C) insert—

“(2D) This paragraph does not apply where—

(a) the transferor company is party to arrangements in accordance with which there is likely to be a transfer of rights or liabilities under the loan relationship by the transferee company to another person in circumstances in which this paragraph would not apply, and

(b) the purpose, or one of the main purposes, of the arrangements is to secure a tax advantage for the transferor company or a person connected with it.

(2E) In sub-paragraph (2D) above—

(a) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions,

(b) “tax advantage” has the meaning given by section 840ZA of the Taxes Act 1988, and

(c) “transfer” includes any arrangement which equates in substance to a transfer (including an acquisition or disposal of, or increase or decrease in, a share of the profits or assets of a partnership);

and section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of that sub-paragraph.

(2F) This paragraph does not apply in relation to a disposal if paragraph 11B above applies in relation to it.”

(2) In paragraph 28 of Schedule 26 to FA 2002 (derivative contracts: continuity of treatment), after sub-paragraph (3ZA) insert—

“(3ZB) This paragraph does not apply where—

(a) the transferor company is party to arrangements in accordance with which there is likely to be a transfer of rights or liabilities under the derivative contract by the transferee company to another person in circumstances in which this paragraph would not apply, and

(b) the purpose, or one of the main purposes, of the arrangements is to secure a tax advantage for the transferor company or a person connected with it.

(3ZC) In sub-paragraph (3ZB) above—

(a) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions,

(b) “tax advantage” has the meaning given by section 840ZA of the Taxes Act 1988, and

(c) “transfer” includes any arrangement which equates in substance to a transfer (including an acquisition or disposal of, or increase or decrease in, a share of the profits or assets of a partnership);

and section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of that sub-paragraph.

(3ZD) This paragraph does not apply in relation to a disposal if paragraph 27A applies in relation to it.”

(3) The amendments made by this paragraph have effect in relation to transactions taking place, or a series of transactions of which the first takes place, on or after 16 May 2008.