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Finance Act 2014

Background Note

20.This measure closes a tax avoidance scheme using derivative contracts.

21.The schemes targeted by the measure involve the use of a derivative contract described as a total return swap under which payments are made, and a deduction is claimed for payments under the total return swap. The payments involved are in substance distributions of profits.  It will apply to any arrangements involving any derivative contract which have the effect of making a payment of all or a significant part of the profits of a company to another company in the same group. The effect of the legislation will be to make it clear that no deduction is due for payments of this nature.

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