Derivative contracts for unallowable purposes: supplementaryU.K.
24(1)For the purposes of paragraph 23 a derivative contract to which a company is party shall be taken to have an unallowable purpose in an accounting period where the purposes for which, at times during that period, the company—
(a)is party to the contract, or
(b)enters into transactions which are related transactions by reference to that contract,
include a purpose (“the unallowable purpose”) which is not amongst the business or other commercial purposes of the company.
(2)For the purposes of this paragraph the business and other commercial purposes of a company do not include the purposes of any part of its activities in respect of which it is not within the charge to corporation tax.
(3)For the purposes of this paragraph, where one of the purposes for which a company—
(a)is party to a derivative contract at any time, or
(b)enters into a transaction which is a related transaction by reference to any derivative contract of the company,
is a tax avoidance purpose, that purpose shall be taken to be a business or other commercial purpose of the company only where it is not the main purpose, or one of the main purposes, for which the company is party to the contract at that time or, as the case may be, for which the company enters into that transaction.
(4)The reference in sub-paragraph (3) to a tax avoidance purpose is a reference to any purpose that consists in securing a tax advantage (whether for the company or any other person).
(5)In this paragraph “tax advantage” has the same meaning as in Chapter 1 of Part 17 of the Taxes Act 1988 (tax avoidance).