Introduction Paragraph 4:
64.In FA 2008, the Government acted to block a scheme that involved the raising of intra-group finance through the issue of convertible securities (a loan that may be converted into shares of the issuing company). The debtor company claimed for tax purposes larger debits than the credits on which the creditor company was chargeable. The legislative response was to require the creditor company to bring in additional credits equal to this excess.
65.This rule has generally been effective in countering the notified schemes but recently new schemes have been notified to HMRC that although again relying on intra-group convertibles to produce an accounting/tax mismatch, are claimed not to be countered by the 2008 fix.
66.The amendments ensure that the creditor company is required to bring into account additional credits in all cases where an intra-group loan involving convertible debt would allow the debtor company to claim debits in excess of the amounts that the creditor would otherwise have to bring into account.