Section 938T — Corporation Tax Act 2010: Tax capacity assumption

Tax capacity assumption 938T 1 This section applies for the purpose of determining whether a scheme will, or might, secure a relevant tax advantage.

2 The economic profits and losses made by the company over the scheme period must be calculated on the assumption that the company—

a obtains the full tax benefit of any loss made by the company in relation to a loan relationship or a derivative contract during the period, and b incurs the full tax cost of any profit made by the company in relation to a loan relationship or a derivative contract during the period.

3 The “full tax benefit” of a loss is the reduction in the liability of the company to corporation tax that would result if—

a the loss were brought into account as a debit or as a reduction in a credit for the purposes of Part 5 or 7 of CTA 2009, and b the company's profits chargeable to corporation tax, disregarding the loss, were equal to the debit (or the reduction in the credit) determined by reference to the loss.

4 The “full tax cost” of a profit is the increase in the liability of the company to corporation tax that would result if—

a the profit were brought into account as a credit or as a reduction in a debit for the purposes of Part 5 or 7 of CTA 2009, and b the company's profits chargeable to corporation tax, disregarding the profit, were nil.