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Loan relationships
The proposed new régime for loan relationships, derivative contracts and foreign exchange gains and losses is explained in a Revenue technical note published on 19 December 2001.
Loan relationships
The proposed new régime for loan relationships, derivative contracts and foreign exchange gains and losses is explained in a Revenue technical note published on 19 December 2001.
One of the issues discussed in the note is the start date. To ensure that companies have time to prepare for implementation, the new rules will apply for companies' accounting periods beginning on or after 1 October 2002. However, to protect the Exchequer, the new rules will be applied from the start of the previous accounting period where a company attempts to obtain a tax advantage by changing its accounting date.
There are also measures to counter avoidance schemes which have been used to exploit the existing loan relationships and financial instruments legislation. One type of scheme uses bonds, sometimes called reset bonds, which, after initially carrying a market rate of interest, contain a provision resetting the interest to a much higher or lower rate. The changes will apply from the date of issue of this press release.
There are also changes to the anti-avoidance rules for certain convertibles, exchangeables and asset-linked securities, announced in July. These changes are:
* relaxations designed to ensure that normal commercial financing transactions are not hindered, they will apply as though they had
been announced in the July consultative document; and
* extensions to the July rules to ensure that all intra-group convertible and exchangeable securities are taxed within an income régime, this extension will apply from 19 December 2001.
Comments on the note and replies to the questions asked in it, and in particular comments on the draft legislation included in the appendices to the document, should be sent by 15 February 2002 to David Gillon, Revenue Policy, Business Tax, 4th Floor, 22 Kingsway, London WC2B 6NR, e-mail: david.gillon@ir.gsi.gov.uk.
The technical note is available on the Revenue website at www.inlandrevenue.gov.uk/consult_new/index.htm.
(Source: Inland Revenue press release dated 19 December 2001.)
