The measure

The Government has introduced an anti avoidance measure in respect of total return swaps and other financial derivatives.

Where profits of a company are paid out under a total return swap or other derivative to another group company no corporate tax deduction will be allowed. If there is no tax avoidance motive credits are also non-taxable. If there is a tax avoidance motive, credits will be taxable.

Who will be affected?

Companies using total return swaps or other derivative contracts giving rise to a payment that equates in substance to profit to another group company.


The rules apply to credits and debits arising on or after 5 December 2013 in relation to transactions entered into on any date.

Our view

This is an anti-avoidance rule and there are exceptions to exclude commercial hedging arrangements with third parties.

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