CFM92650 | Debt cap: anti-avoidance rules: general: excluded schemes

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Excluded schemes, set out in Regulations, form a filter for the anti-avoidance rules

Each of the three sets of anti-avoidance rules within TIOPA10/PT7/CH6 has a second filter (in addition to the main purpose filter) which consists of a set of excluded schemes. These excluded schemes are described in Regulations (SI 2013/2892) and came into force on 4 December 2013. These Regulations describe certain arrangements to which particular provisions of TIOPA10/PT7/CH6 do not apply. The Regulations cover particular schemes undertaken substantially for commercial purposes or which form part of a group’s normal and acceptable tax planning, but also have an effect on the debt cap position. The exclusions provide a ‘safe harbour’, so it will not be necessary for groups to consider in detail whether or not the ‘debt cap purpose’ is a main purpose.

If a scheme meets the conditions for an excluded scheme then the anti-avoidance rules do not apply to that scheme. The conditions may consist of particular hallmarks or require an assessment of the outcome of the scheme, or a mixture of both.

Regulation 12 provides that if a disclosed avoidance scheme under DOTAS (FA04/S309-319) cannot be an excluded scheme.

It is possible that transactions fitting within the description set out in the Regulations form a part of a wider scheme. This does not prevent that wider scheme (within the meaning of S312(1), see CFM92615) from falling within the ambit of the anti-avoidance rules, where the defined conditions apply.

A scheme was only considered as an excluded scheme where the totality of the scheme fell within the particular conditions. The guidance did not apply to individual or even multiple elements of a scheme, where the scheme included other elements and does not apply to disclosed schemes.

Guidance on excluded schemes is at CFM92670 (gateway test), CFM92735 (main rules).

Position before the Regulations came into force

The Regulations have effect for schemes entered into on or after 4 December 2013. However, before that date there was guidance in the CFM, intended to cover the position for schemes entered into before the Regulations come into force.

Before the regulations were laid, HMRC undertook not to seek to apply the anti-avoidance rules in PT7/CH6 to certain types of arrangements, described in the guidance. These arrangements were essentially the same as the excluded schemes set out in the Regulations.