C1C2Part 7Derivative contracts
Chapter 11Tax avoidance
Transactions not at arm's length
695AF1Disguised distribution arrangements involving derivative contracts
1
This section applies if—
a
a company (“A”) is a party to arrangements involving one or more derivative contracts (each of which is referred to in this section as a “specified contract”),
b
another company (“B”) is also a party to the arrangements (whether or not at the same time as A),
c
A and B are members of the same group,
d
the arrangements result in what is, in substance, a payment (directly or indirectly) from A to B of all or a significant part of the profits of the business of A or of a company which is a member of the same group as A or B (or both) (“the profit transfer”), and
e
the arrangements are not arrangements of a kind which companies carrying on the same kind of business as A would enter into in the ordinary course of that business.
2
No debits in respect of a specified contract, which—
a
relate to the profit transfer, and
b
apart from this section, would be brought into account by A or B for the purposes of this Part,
are to be so brought into account.
3
Where one or more debits in respect of a specified contract are not brought into account by virtue of subsection (2), credits arising from the same contract which—
a
relate to the same profit transfer, and
b
apart from this section, would be brought into account by A or B for the purposes of this Part,
are not to be so brought into account to the extent that the total of those credits does not exceed the total of those debits.
4
Subsection (3) does not apply to any credit which arises directly or indirectly in consequence of, or otherwise in connection with, arrangements the main purpose of which, or one of the main purposes of which, is the securing of a tax advantage for any person.
5
For the purposes of this section a company is a member of the same group as another company if it is (or has been) a member of the same group at a time when the arrangements mentioned in subsection (1) have effect.
6
In this section—
“arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;
“group” has the meaning given by section 357GD of CTA 2010;
“tax advantage” has the meaning given by section 1139 of CTA 2010.
Pt. 7 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)