1.Section 48 and Schedule 24 make provision for returns from certain arrangements that produce returns that are economically equivalent to interest to be charged to corporation tax in the same way as profits from a loan relationship.
2.Paragraph 1 amends Part 6 of the Corporation Tax Act 2009 (CTA), which deals with certain matters that are treated as loan relationships, although they are not actually loan relationships. All references below are to the CTA unless otherwise indicated.
3.Paragraph 2 inserts into CTA a reference to the new Chapter 2A which contains the legislation on disguised interest.
4.Paragraph 3 inserts the new Chapter 2A into CTA. References to Chapter 2A below are to the new Chapter 2A.
5.Section 486A is introductory. It provides for Part 5 of CTA (loan relationships) to apply in relation to returns which are economically equivalent to interest. It also refers to exceptions in section 486C to 486E (see notes on the exceptions below).
6.Section 486B(1) contains the legislative principle. Where a company is party to an arrangement that produces for it a return on an amount which is “economically equivalent to interest” then the return is to be taxed as if it were a profit from a loan relationship.
7.Section 486B(2) defines what is meant by a return on an amount that is “economically equivalent to interest”.
8.Section 486B(2)(a) reproduces a number of indicia commonly cited in cases on the meaning of interest:
9.The return must be calculated by reference to an amount. In Euro Hotel (Belgravia) Ltd 51TC293 Megarry J said:
“there must be a sum of money by reference to which the payment which is said to be interest is to be ascertained”. Thus, the return has to arise from some form of investment or entitlement; and
it must be reasonable to assume that it is a return by reference to the time value of that amount. In Bennett v. Ogston 15 TC 374 Rowlatt J described interest as 'payment by time for the use of money'.
10.Section 486B(2)(b) provides that the rate of return must be reasonably comparable to a commercial rate of interest.
11.Section 486B(2)(c) ensures that, viewed at the “relevant time”, there must be no “practical likelihood” that the arrangement will cease to produce the return (unless the person by whom it falls to be produced is prevented from producing it). “Practical likelihood” is the term used by Lord Oliver in Craven v White 62 TC 1 commenting on Lord Brightman’s speech in Furniss v Dawson 55 TC 324 describing the cases when the Ramsay principle, as understood at the time, would apply. It has now to be understood in the light of the judgment of the House of Lords in Scottish Provident Institution 76 TC 538 as precluding attempts to manufacture a “falsifying” arrangement.
12.Section 486B(3) defines the relevant time as the later of the time when the company becomes party to the arrangements or the time when the return begins to be produced.
13.It must therefore be clear at the outset that the return will be produced. Thus, although there is no express requirement for the arrangement to be “designed” to produce the return, the return must be initially predictable.
14.Subsections (4) and (5) ensure that the credits and debits in respect of the loan relationship are taxed on an amortised cost basis; this being regardless of whether they are recognised in the accounts of the company that obtains the return. Thus, if the return is capitalised by being included in the value of an asset on the balance sheet, or is not recognised, in the accounts at all, the return must still be recognised using an amortised cost basis so that the whole of the return is recognised on an accruals basis.
15.Section 486B(6) deals with cases where two or more persons are party to an arrangement which in aggregate produces a return to which the legislation would apply if it were produced for just one of them. The taxable return is apportioned between them on a just and reasonable basis.
16.This rule is intended to prevent companies side-stepping the new rule by fragmenting the return so that each return looked at separately does not constitute an interest-like return, but when the return is looked at as a whole it does.
17.Section 486B(7) provides that the only amounts brought into account for corporation tax purposes in relation to a return are those that are brought into account under section 486B. This for instance ensures that any return that is so brought into account is excluded from corporation tax on chargeable gains. See also the comments on section 486C below, which indicate how this provision interacts with that section.
18.Section 486B(8) ensures that the credits and debits to be brought into account include exchange gains and losses that arise as a result of translating the accounts carrying value of the return and the principal amount by reference to which the return falls to be produced.
19.Section 486B(9) defines arrangement as including any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). It does now however include any arrangement that constitutes a finance lease within the meaning of section 219 of the Capital Allowance Act 2001 (CAA). This ensures that all such arrangements continue to be taxed according to current rules (and in particular that leases that are not long funding leases within the meaning of section 70G of CAA are not brought within the scope of the legislation). Operating leases by contrast are not within the scope of the legislation at all.
20.Section 486C is a scope or boundary rule: it provides that any part of the return that is charged to corporation tax as income of the company or brought into account as income of the company for corporation tax purposes is not charged under the Chapter. The exclusion does not apply where the return would fall to be taxed as income or brought into account as income at any time that is later than the time when it would be taxed under section 486B, meaning that (if the section applies at all) it is not disapplied in relation to income that would be taxed at a time later than under section 486B. But if in consequence Chapter 2A has the effect that some of the income is taxed before it otherwise would be, section 486B(7) then ensures that that income is not taxed again.
21.Section 486C also provides that any exclusion in relation to debits or credits arising from items within the loan relationship, derivative contracts or intangible fixed asset rules is not overridden by anything in Chapter 2A. However, this does not apply in relation to any return that would be taxed as a chargeable gain by virtue of section 641 (which treats profits on certain types of derivative contracts as capital ones).
22.Section 486D(1) provides an important exclusion for any case where it is not the main purpose or one of the main purposes (if there is more than one) of the company being party to the arrangement to obtain a “relevant tax advantage”. “Relevant tax advantage” is defined in section 486D(4).
23.Section 486D(2) provides that a company may elect that the Chapter is to apply in relation to a particular arrangement as if section 486D(1) were omitted. Such an election might be advantageous to the “lender” under an arrangement such as a structured finance arrangement who, at least in theory, may otherwise be taxed on a greater amount than under the disguised interest rules.
24.Section 486D(3) provides that an election may not be made by a company in a case where the Chapter applies by virtue of section 486B(6). It also provides that the election must be made no later than the time when the arrangement begins to produce a return for the company, and is irrevocable. This is subject to paragraph 15 of the Schedule, which in all cases allows an election to be made before 1 August 2009, having effect in relation to returns produced on or after the time the election is made.
25.Section 486D(4) provides that “to obtain a relevant tax advantage” means to secure that the return is produced in a way that means that it would be taxed more favourably than it would be if it were charged to tax as income or brought into account as income at the time that the return would be recognised under section 486B.
26.This main purpose test requires consideration of two questions. The first question is whether, as a matter of fact, the return produced by the arrangements for the company is produced in form (such as a capital gain or dividend) that would be taxed more favourably than it would be if that return were taxed in the same way as interest. This is a purely objective matter. The second question is whether it is reasonable to assume that it was a main purpose of the company being party to the arrangements to secure that the return was produced for it so as to give that rise to that advantage.
27.Section 486D(5) provides that the tax avoidance exclusion does not apply where the return is produced for a company that is a controlled foreign company (CFC). This is because it is unclear whether a company that is not within the charge to corporation tax can have a main purpose of avoiding it.
28.For this purpose, a CFC means a company whose profits are apportioned or would be apportioned but for one of the exemptions in section 748(1) of the Income and Corporation Taxes Act 1988 (ICTA).
29.Section 486E introduces the other main exclusion from Chapter 2A and the notion of “excluded shares”.
30.Section 486E(1) states that the Chapter will not apply for an accounting period (the “relevant accounting period”) for which an arrangement produces a return if the arrangement involves only “relevant shares” held by the company (“holding company”) for which the return is produced throughout the “relevant period”.
31.Section 486E(2) to (11) contain definitions relevant for construing section 486E(1).
32.Section 486E(2) explains what is meant by “relevant period”. It is the period starting with the date on which the company becomes party to the arrangement (or if later when the return begins to be produced) and ending with the end of the accounting period for which it is necessary to ascertain whether the share is a relevant share (or if earlier when company ceases to be party to the arrangement or when the arrangement ceases to produce a return).
33.Section 486E(3) explains what is meant by “involves only” a share. An arrangement involves only a share if (and only if) the return that is produced for the company consists purely of an increase in the fair value of the share. This thus excludes from Chapter 2A all straightforward share investments in “relevant shares” where the only economic exposure that the holding company has to the shares that it holds is to the value of the shares. The legislation also clarifies that where part of a fair value increase is paid as a dividend then that is not to affect the question of whether a return reflects only such an increase.
34.It follows that the legislation is not prevented from applying where the return is derived from a combination of holding the share and some other arrangement such as a forward sale or other derivative. It also follows that it would not be prevented from applying if the arrangement involves some other transaction such as a repo (and see in this connection section 486E(11)). But in any such case it would still be necessary for a tax avoidance purpose (within section 486D) to be present before the legislation could apply.
35.Section 486E(4) defines “fair value” in the same way that it is now defined for loan relationship purposes (see section 313(6) of CTA). It also clarifies that payment of a dividend does not affect the fair value return arising from a share.
36.Section 486E(5) defines “relevant shares” as meaning shares which throughout the “relevant period” are either i) “fully paid up shares” of a “relevant company” or ii) other shares which would be accounted for by the issuer as a financial liability and which produce for the holding company a return economically equivalent to interest for the purposes of Chapter 6A (shares as liabilities). It is not necessary for there to be any charge under Chapter 6A in relation to such a share in order for this exclusion to apply. Section 930I (corporation tax treatment of company distributions)_also ensures that such shares do not generally give rise to taxable distributions (subject to section 930M).
37.Section 486E(6) defines “fully paid-up share” for the purposes of subsection (1), in terms similar to section 524(4) of CTA. This requirement is meant to ensure that arrangements such as those within section 524 of CTA will continue to be caught.
38.Section 486E(7) defines “relevant company”. A relevant company is a company connected with the holding company, a relevant joint venture company, or a relevant CFC.
39.Section 486E(8) defines “connected” for the purposes of subsection (7) as having its section 466 of CTA meaning. This is equivalent to old section 87 of the Finance Act (FA) 1996.
40.Section 486E(9) defines “relevant joint venture company” as a company in relation to which the holding company has at least a 40 per cent interest provided that one other person also has such an interest.
41.Section 486E(10) provides that section 755D of ICTA is to have effect for the purposes of determining “control” in subsection (9).
42.Section 486E(11) defines a relevant CFC as one whose profits are apportioned to the holding company or are not so apportioned because of an exemption.
43.These exclusions are intended to put beyond doubt that straightforward share investments in relevant companies cannot give rise to a charge at any tier. This is because the only return that arises at each tier is an increase in the value of the relevant shareholding in a group company. So if company A holds all shares in company B which holds all shares in company C, then company B’s holding is excluded if the return company B obtains is an increase in value of the company C shares and company A’s holding is excluded if its return is an increase in value of the company B shares.
44.Section 486E(12) provides that section 550(3) shall not have effect for the purpose of determining whether shares are held by a company for the purposes of this section (excluded shares). Section 550(3) deems a company to hold shares when as a matter of fact it does not, so this provision ensures that the section 486E exclusions, which depend upon a company holding a share, cannot be engaged by this deeming. On the other hand there is nothing to prevent section 545(2), which deems a company that holds shares under a creditor repo not to hold them, from applying. This means that the exclusions in section 486E do not apply to either the original owner or temporary owner under a repo.
45.Paragraph 4 inserts a new Chapter 6A into the CTA (Shares accounted for as liabilities). It provides a limited replacement for what were sections 91B to 91E of FA 1996 (now Chapter 7 of Part 6 of CTA - shares with guaranteed returns), particularly for that part dealing with "preference share lending" (mostly old section 91D) as, for the reasons given in the consultation document on principles–based drafting issued in November 2008, it is considered better to deal separately with disguised interest in what are clearly not loans in substance or form on the one hand, and what are simply loans dressed up as investment in preference shares on the other.
46.The Chapter as a whole is headed “Shares accounted for as liabilities”. This will cover many shares which are redeemable in accordance with their terms.
47.Section 521A introduces the Chapter and provides for it to treat certain shares held by one company in another company as if they were rights under a creditor loan relationship.
48.Subsection (1) (taken with subsection (3)) provides for the main loan relationships rules in Part 5 (previously Chapter 2 of Part 4 of FA 1996) to apply to the holder of certain shares.
49.Subsections (2) and (6) signpost later sections of CTA and also section 116B of the Taxation of Chargeable Gains Act 1992 (TCGA) dealing with the TCGA implications of changes in the status of certain shares.
50.Subsection (3) states that references in the Chapter to the ”investing company” and “issuing company” are respectively to A and B.
51.Subsection (4) ensures that shares already treated as loan relationships - those in a building society - are not included in the meaning of shares. This replicates section 522(6).
52.Subsection (5) prevents a company from being treated as holding shares that are subject to a repo transaction. This is to prevent the investing company from being able to benefit from any exclusion in section 521C (for instance, the connected party exclusion) that depends on the company holding the share. In any such case Chapter 2A may then apply in relation to the share (since the return does not derive wholly from share ownership).
53.Subsection (6) highlights that section 116B of TCGA (previously section 91G(2) of FA 1996) applies to determine the effect for the purposes of corporation tax on chargeable gains when a share begins or ceases to be one to which section 521C applies. See also the note on paragraph 5 of the draft Schedule below.
54.Section 521B(1) is the operative rule.
55.Subsection (2) applies Part 5 (loan relationships) to the holder of the share in relation to the times in that company’s accounting period when it holds a share in another company and section 521C applies to the share. The fact that the share is treated as a loan relationship (so that it no longer pays distributions) does not however prevent a dividend paid in respect of that share from being taken into account when considering whether the company (if a controlled foreign company) has satisfied an acceptable distribution policy.
56.Subsection (3) ensures that where relevant to the treatment of the holder, the issuing company is treated as a debtor under the loan relationship deemed by subsection (2). Identification of the debtor may be needed in some cases so that other tax rules, such as transfer pricing, can operate correctly. But as noted below the legislation cannot apply where the share issuer and holder are connected, which means that section 349 (connected companies required to use amortised cost accounting) will not be in point in relation to this provision. On the other hand, subsection (4) prevents debits being claimed in respect of such shares.
57.Subsection (4) provides that no debits may be brought into account by the investing company in relation to any share to which Chapter 6A applies. This replicates the exclusion for such debits currently within section 523(3). Unlike that provision, this does not apply in relation to exchange debits. This provision is necessary to prevent attempts to create artificial tax debits.
58.Subsection (5) ensures that any reference to the share in the Chapter is to the share mentioned in subsection (1).
59.Section 521C contains the conditions a share must meet to be a "share" to which section 521B(2) applies. By virtue of subsection (1) a share is to be treated as a creditor relationship of the investing company if:
the share would be accounted for as a liability by the issuing company in accordance with generally accepted accounting practice - subsection (1)(a). This means generally accepted accounting practice as defined by section 50 of FA 2004, which for this purpose means either International Accounting Standard (IAS) 32 or the UK equivalent Financial Reporting Standard (FRS) 25. This accounting rule replaces the “redeemability” condition in section 529;
the share produces for the investing company a return which is economically equivalent to interest (whether through dividends, redemption amount or a combination) – subsection (1)(b). This is different from the wording in section 529, but relies instead on the definitions in Chapter 2A;
the issuing company and the investing company are not connected companies - subsection (1)(c). This does not replicate any provision in section 529, and provides certainty that a share cannot be treated as a creditor relationship where the issuer and holder are connected companies. Distributions on such shares may however be taxable in accordance with section 930M (schemes in the nature of loan relationships);
The share is within subsection (3) - subsection (1)(d);
The share is not an excepted share within section 521D; and
The investing company holds the share for an unallowable purpose as defined by section 521E. The definition of “unallowable purpose” is based on that in Chapter 2A. See the notes on section 521E below.
60.Subsection (2) defines “economically equivalent to interest” for the purposes of subsection (1) in terms identical to section 486B(2).
61.Subsection (3) defines the “relevant time” for the purposes of section subsection (2). It means the later of the time when the share is first held and the return first begins to be produced.
62.Subsection (4) provides that a share meets the condition in section 486(1)(d) (requirement for condition in subsection (3) to be met) if the share is not already treated as a creditor relationship because of section 490 (unit trusts and offshore funds treated as creditor relationships). This replicates what is currently in section 529 (see section 526(1)(b).
63.Subsection (5) gives “connected” the same meaning as in section 466.
64.Section 521D(1) provides that a share is excepted for the purposes of section 521C(1)(e) (and so excluded from application of the legislation) if:
it is a qualifying publicly issued share; or
it is a share that mirrors a public issue (as to which see subsection (3) and (4)).
65.Section 521D(2) provides that a share is a qualifying publicly issued share where it was issued by a company as part of an issue to independent persons (defined as a person not connected with the company) and the investing company and persons connected with it hold less than 10 per cent of that issue.
66.Sections 521D(3) and (4) define the two cases where a share mirrors a public issue.
67.Case 1 is where a company (A) issues shares to independent persons (the public issue) and within 24 hours of that issue, other group companies issue shares (the mirroring shares) to company A on the same or substantially the same terms as the public issue and the total nominal value of the mirroring shares does not exceed the nominal value of the public issue – section 521D(3).
68.Case 2 expands the range of mirroring shares to allow for chains of shares to be issued within a group –section 521D(4).
69.Section 521E(1) provides that a share is acquired by the investing company for an unallowable purpose for the purposes of section 521(1)(f) if the main purpose (or one of the main purposes) for which the company holds the share is to secure a “relevant tax advantage”.
70.Section 521E(2) provides that the investing company may elect that Chapter 6A is to apply in relation to shares that produce a return as if section 521(1)(f) were omitted.
71.Section 521E(3) provides that the election must be made no later than the time when the share begins to produced for the company, and is irrevocable. This is subject to paragraph 16 which in all cases allows an election to be made at any time before 1 August 2009, but only in relation to returns arising on or after that date.
72.Section 521E(4) provides that “secure a relevant tax advantage” means secure that the return is taxed more favourably than it would be if it were wholly charged to tax as income or brought into account as income at the time when it would be taxed if the share were a loan relationship.
73.Section 521E(5) provides that the tax avoidance exclusion does not apply where the return is produced for a company that is a CFC. This is because it is unclear whether a company that is not within the charge to corporation tax can have a main purpose of avoiding it.
74.For this purpose, a CFC means a company whose profits are apportioned or would be apportioned but for one of the exemptions in section 748(1) of ICTA.
75.Section 521F deals with the consequences for loan relationships and corporation tax on chargeable gains purposes when a share begins or ceases to meet the conditions in section 521B. This may be because the share begins or ceases to be accounted for as a liability, begins or ceases to be held for an unallowable purpose or the parties become or cease to be connected or for some other reason.
76.Under subsection (2) the investing company is treated for the purposes of the loan relationship rules in Part 5 of CTA as having acquired and disposed of the share immediately before that time for an amount equal to its “notional carrying value”.
77.Subsection (3) defines “notional carrying value” as meaning the amount which would have been the carrying value of the share in the investing company’s accounts if a period of account had ended immediately before section 521B began or ceased to apply
78.Section 521F(4) defines “carrying value” by reference to section 316 of CTA (previously paragraph 19A(4) of Schedule 9 to FA 1996).
79.The overall effect of section 521F is that the acquisition value for the deemed loan relationship should generally be the accounts carrying value of the shares and the deemed disposal should generally be for an amount equal to the accounts carrying value. It will be rare for the accounts carrying value to differ from the tax carrying value because of the exclusion for connected party shares.
80.Paragraph 5 amends section 116B of TCGA. Section 116B is the rewritten version of section 91G(2) of FA 1996 inserted into TCGA by CTA (so far as it applies for the purposes of corporation tax on chargeable gains) and is reproduced below as it will appear following the amendments:
(1)If at any time section 521B of CTA 2009 begins or ceases to apply in the case of a share held by the investing company it is treated for the purposes of this Act [chargeable gains] —
(a)as having disposed of the share immediately before that time for consideration of an amount equal to the notional carrying value of the share at that time, and
(b)as having immediately reacquired it for consideration of the same amount.
(2)In this section—
“notional carrying value” has the same meaning as in section 521E(2) of CTA 2009 (see subsection (3) of that section),
and
“investing company” has the same meaning as it has for the purposes of Chapter 6A of Part 6 of that Act (shares accounted for as liabilities) (see section 521A(3) of that Act).”
81.The effect of this is that (on a share ceasing to meet the conditions in section 521C) the acquisition value for the shares for the purposes of corporation tax on chargeable gains should generally be the accounts carrying value of the shares and (on a share beginning to meet those conditions) the deemed disposal value should generally be the accounts carrying value. As with paragraph 367 of Schedule 1 to CTA, there is no provision for any hold over of gain or loss.
82.Paragraph 6 makes a consequential amendment to the rules on arbitrage in section 26 of F(No.2)A 2005 so that references in subsection (10) to section 91A and 91B of FA 1996 are replaced by equivalent references to Chapter 2A or 6A of Part 6 of CTA.
83.Paragraph 7 makes a number of amendments to Schedule 4 to CTA to reflect new Chapters 2A and 6A.
84.Paragraph 8 signposts the repeals. The most important repeals here are those of sections 91A to 91G of FA 1996 - the rules that treat shares as loan relationships in certain circumstances. It also repeals sections 91H and 91I of FA 1996 and sections 131 to 133 of FA 2004, which cover partnerships. This points up that the rules here go wider than dealing with shares and deal with any arrangements including partnerships and contributions to partnerships as well as shares. The rules on quasi-stocklending at sections 736C and 736D of ICTA, and quasi-interest arising from repos in section 547, are also repealed.
85.Paragraph 9 contains consequential repeals.
86.Paragraph 10 gives the main commencement rule. The disguised interest rules in Chapter 2A have effect in relation to any arrangement to which the company became party on or after 22 April 2009. This is subject to paragraph 12 in relation to certain existing “caught” arrangements.
87.Paragraph 11 states that the amendments and repeals made by paragraphs 2(3), 4 (shares accounted for as liabilities), 5 (amendments and repeals relating to section 116B of TCGA), 6 (arbitrage), 7 (index of expressions), 8 (repeals) and 9 (consequential repeals) come into force on or after 22 April 2009.
88.Paragraph 12(1) gives the transitional rule in respect of existing arrangements in force as at 22 April and provides that the paragraph applies where Chapter 7 of Part 6 (shares with guaranteed returns), or any of the other provisions being repealed applies in relation to anything done by a company before 22 April 2009 which amounts to an arrangement within the meaning of section 486B(7) to which Chapter 2A might apply if a company became party to the arrangement on or after 22 April.
89.Sub-paragraph (2) then provides that the company is to be treated for the purposes of Chapter 2A as having become party to an arrangement on 22 April. This will not automatically trigger the application of Chapter 2A, but merely make it capable of applying if all the other conditions are met in relation to that arrangement.
90.Sub-paragraph (3) provides that paragraph 12 does not apply if paragraph 13 (former section 91A to 91E shares) applies instead.
91.Paragraph 13(1) gives the rule for determining the treatment for the purposes of corporation tax on chargeable gains in a case where Chapter 7 of Part 6 (shares with guaranteed returns) applies in relation to a share held by a company on 21 April 2009.
92.Sub-paragraph (2) provides that section 116B of TCGA is to be treated as applying as if, on 21 April 2009, the share ceased to be one to which section 91A or 91B applied.
93.This deemed disposal (triggered by the version of section 116B of TCGA in force at 21 April 2009) has the effect that any gain or loss originally deferred under section 91G of FA 1996 when the shares as debt rules began to apply (only applicable if they began to apply on 16 March 2005) is crystallised. Thereafter, any return can be brought into account only under Chapter 2A. It also gives rise to a deemed disposal of the (deemed) creditor loan relationship at fair value and a deemed acquisition cost for the purpose of corporation tax on chargeable gains at that value.
94.Sub-paragraph (3) provides that paragraph 13 does not apply if paragraph 14 (section 91D shares which become Chapter 6A shares) applies instead.
95.Paragraph 14 sets out a separate rule for the cases within paragraph 13(3) to which Chapter 6A applies on 22 April 2009.
96.Sub-paragraph (2) provides in this case that Part 5 of CTA applies as if the company has acquired the share on 22 April 2009 for its notional carrying value on that date. There might be a difference between this amount and the closing value of the creditor relationship as at 21 April 2009. This is a tax nothing.
97.Sub-paragraph (3) defines notional carrying value as having its section 521E(2) meaning.
98.Sub-paragraph (4) ensures that section 521E does not come into force by virtue of the coming into force of section 521B.
99.Current tax law contains a number of targeted anti-avoidance rules to ensure that amounts that are economically equivalent to interest are charged to corporation tax in the same way as interest.
100.The section and Schedule replace these piecemeal responses with a rule that sets this principle out comprehensively. It is the result of consultation on the use of “principles-based drafting” to tackle avoidance involving disguised interest. The effect of the legislation is that (subject to the excluded share rule and arrangements not involving tax avoidance) a return equivalent to interest is charged to corporation tax in all circumstances where it would not currently be taxed as income.
101.The new legislation follows two consultation exercises on the use of principles-based drafting to counter avoidance in the areas of financial products. The consultation documents can be accessed at the following references: