Moment in time

The taxpayer company took part in a complex avoidance scheme in 2004. The purpose was to create a tax loss in the business’s 2005 accounting period and to enable the loss to be surrendered to companies in the BNP Paribas group.

The arrangement began with BNP buying shares in the taxpayer which then issued four classes of preference shares each of which had rights that matched those of one of four sets of bonds held by the company. The taxpayer then changed its accounting principles for the year ended 31 December 2005 from UK generally accepted accounting practice (GAAP) to international financial reporting standards (IFRS).

Finance Act 1996 sch 9 para 19A provided that a change in accounting policy that caused the carrying value of a loan relationship in a company’s accounts to change between the end of one period and the start of the next...