The measure

Following a consultation announced in June 2013 aimed at modernising the taxation of corporate debt and derivative contracts, the Government today announced that draft legislation will be published shortly in relation to two specific measures:

  • prevention of abuse of the 'bond fund' rules and clarification of certain aspects of those rules, including permitting corporate investors to make a claim to disapply those rules in certain prescribed circumstances; and
  • clarification and rationalisation of the taxation of corporate partners where loan relationships and derivative contracts are held or owed by a partnership.

The wider consultation will continue in the New Year.

Who will be affected?

The Finance Bill 2014 changes will affect members of partnerships holding corporate debt and derivatives and corporate entities currently affected by the bond fund rules.


Although today's Autumn Statement did not make it clear, we understand that the provisions to rationalise the corporation tax treatment of loan relationships held or owed by corporate partnerships and changes to the bond fund rules will appear in Finance Bill 2014. Draft legislation is expected early next year.

No details have been released as yet as to when the announced changes will take effect.

A number of other changes are anticipated for Finance Bill 2015, however, their precise form is subject to further consultation and will be announced in due course.

Our view

These proposals will constitute a significant change to the corporation tax treatment of corporate partnerships. The effect of changes to be made to the bond fund rules remains to be seen once the details are released. However, general corporates may welcome the opportunity to elect to disapply the bond fund rules.

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