FA 2010 analysis – Risk transfer schemes

In 2009 HMRC announced an intention to legislate against certain transactions which are not traditional 'avoidance' schemes (as acknowledged by HMRC) entered into to secure particular 'financial advantages' — so-called 'risk transfer schemes'. What is particularly interesting is the way in which HMRC has legislated against these transactions leaving taxpayers with a risk of potential tax downside and effectively taxing on a group basis and on the basis of 'economic profits and losses'.

What are risk transfer schemes?

'Risk transfer schemes' are transactions entered into by groups to hedge particular exposures in a way that passes the underlying risk to the Exchequer. Foreign exchange risk is the typical example which this article concentrates on; however risk transfer schemes have not necessarily been restricted to this (groups could be hedging the overall value of an...