CFM70020 – Corporate Finance Manual – HMRC Internal Manual


CFM70010 explains that certain tax rules relating to corporate debt are found outside the main body of legislation on loan relationships and derivative contracts in parts 5 to 7 CTA09. Guidance on them is provided below.

Loan Relationship Exemptions

Part 19 of the CTA09 provides exemptions from corporation tax. These exemptions include a number of types of income that would otherwise be taxable under the loan relationship rules. CFM70100 has more details.

Banks and building societies

CFM71000 explains special rules for banks and building societies, on dormant accounts, unclaimed assets and on business transfers from the building society.

Securitization companies

There are special rules governing the taxation of certain types of companies involved in securitisations. See CFM72000.

Structured finance

Rules on ‘structured finance agreements’ were introduced by the FA 2006. These rules treat certain agreements which have the economic effect of a loan as if they were loan relationships. See CFM73000.

Securities Lending and Manufactured Payments and Repurchase Agreements

Securities lending is a financial arrangement that involves the transfer of securities. It is similar in form to sale and repurchase (“repos”) agreements which are a form of secured lending. The loan relationship tax rules that apply to repurchase agreements are explained in CFM46000.

CFM74000 explains the tax rules on stock lending and “fabricated payments” that characterize both stock lending and repurchase agreements.

tax deduction

A tax deduction is required on certain interest payments and annual installments. CFM75000 defines these rules.

Changes in accounting practice

Regulations have been made to ensure that certain amounts resulting from the transition to international accounting standards are recognized (or deferred, or exempt from recognition. See CFM76000.

Income stream transfers

Legislation to counter the sale of an income stream in an attempt to turn economic income into a return on capital was enacted in FA 2009. See CFM77000.

Financial arrangements equivalent to lending and leasing

Many types of financial arrangement are economically equivalent to a loan but take a different legal form – see for example CFM44000 on ‘alternative finance’. Leasing is another way for companies to finance their activities. Guidance on leasing can be found in the Business Income Manual (BIM61000).

Group mismatch schemes

Group mismatch rules apply where two or more companies are members of a group and are parties to a mismatch group arrangement, where the arrangement is entered into to obtain the change to obtain a relevant tax benefit. See CFM77500+.


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