Loan relationship scheme blocked

The Treasury announced on Monday 27 February 2012 that it had taken steps to block one of two aggressive tax avoidance schemes used by Barclays, which were projected to avoid £500m in tax.

Draft clauses  will be contained in Finance Bill 2012 to counter arrangements which seek to avoid a corporation tax charge on a “deemed release” under ss 361 and 362 CTA 2009, which would normally arise where a group purchases its own impaired debt.

What is of interest with these proposed changes is not so much the detail of the schemes that HMRC is seeking to block, but that the draft legislation inserts provisions in a new section 363A CTA 2009 which are explicitly retrospective. The new clauses will counter arrangements between 1 December 2011 and 27 February 2012.

This draft legislation arises as a result of a recent disclosure under the DOTAS rules, demonstrating the robustness of HMRC’s approach to any scheme which seeks to circumvent legislation. However, there may be some concern that HMRC is making candid use of retrospective legislation.

For further information please call TaxDesk on 0845 4900 509 and ask for Paul Howard.