Corporation Tax Act 2010

1013 Exception to section 1012

(1) Section 1012 does not prevent section 1008 from applying in relation to a security at a given time if—

(a) each of conditions A to D is met in relation to any hedging arrangements existing at that time that relate to some or all of the company’s liabilities under the security, and

(b) at all earlier times after 16 April 2002 when there have been hedging arrangements that relate to some or all of the company’s liabilities under the security, each of conditions A to D was met in relation to those arrangements.

(2) Condition A is that the hedging arrangements do not constitute, include or form part of any scheme or arrangement the purpose or one of the main purposes of which is the avoidance of tax.

(3) In subsection (2) “tax” includes stamp duty and stamp duty land tax.

(4) Condition B is that the hedging arrangements are such that any amounts intended under the arrangements to offset some or all of a corporation tax deduction in respect of the security—

(a) arise at the time when the deduction falls to be made, or within a reasonable time before or after that time, and

(b) arise—

(i) to the issuing company, or

(ii) to a company which is a member of the same group of companies as the issuing company.

(5) In subsection (4) “corporation tax deduction” means a deduction that falls to be made for corporation tax purposes by the issuing company at any time.

(6) Condition C is that the whole of every amount arising as mentioned in subsection (4) is brought into charge to corporation tax—

(a) by a company falling within subsection (4)(b)(i) or (ii), or

(b) by two or more companies (taken together) each of which falls within subsection (4)(b)(i) or (ii).

(7) Condition D is that for corporation tax purposes any deductions in respect of expenses of establishing or administering the hedging arrangements are reasonable in proportion to the amounts required to be brought into charge to corporation tax by subsection (6).

(8) For the purposes of this section two companies are members of the same group of companies if they are members of the same group of companies for the purposes of Part 5 (see section 152).