In a bid to end the abuse of derivative contracts, the government has announced in its Autumn Statement that it plans to introduce legislation to enhance current rules.

Amendments to existing anti-avoidance provisions at section 492 Corporation Tax Act 2009 (CTA 2009) are set to prevent abuse of the 'bond fund' rules in Chapter 3 of Part 6, CTA 2009, clarify and rationalise certain aspects of those rules, and permit corporate investors to make a claim in certain prescribed circumstances to disapply the bond fund rules.

Legislation will also be introduced to clarify and rationalise the taxation of corporate partners where loan relationships and derivative contracts are held by a partnership.

The changes follow consultation on the review of the legislation governing the taxation of corporate debt and derivative contracts (Finance Bill 2014).

The government will also close down tax avoidance schemes using total return swaps with immediate effect - the schemes had enabled companies to pay their profits to a company in the same group located overseas, thus escaping a corporation tax liability