Part 3Income tax, corporation tax and capital gains tax

Anti-avoidance

28Restriction on expenses of management

1

Section 75 of ICTA (expenses of management: companies with investment business) is amended as follows.

2

After subsection (2) insert—

2A

A deduction is not to be allowed under that subsection for any particular expenses of management if any part of those expenses is incurred directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure the allowance of a deduction (or increased deduction) under that subsection or any other tax advantage.

2B

Subsection (2A) above does not apply if, as a result of paragraph 7A of Schedule 23A (manufactured payments under arrangements having an unallowable purpose), the company incurring the expenses is not entitled to a relevant tax relief (within the meaning of that paragraph) in respect of, or referable to, the whole or any part of the expenses.

2C

The reference in subsection (2A) above to expenses of management includes amounts treated by any provision as deductible under this section.

3

After subsection (5) insert—

5A

For the purposes of subsection (5)(a) above investments are not held for a business or other commercial purpose if they are held directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure the allowance of a deduction (or increased deduction) under subsection (1) above or any other tax advantage.

4

After subsection (10) insert—

11

In this section—

  • “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

  • “tax advantage” has the meaning given by section 840ZA.

5

The amendments made by this section have effect in relation to accounting periods beginning on or after 20th June 2007, but have no effect in any case where the particular management expenses in question were paid before that date.

6

In the case of an accounting period of a company beginning before, and ending on or after, that date, those amendments have effect as if, for determining the amounts that are deductible for the period under section 75(1) of ICTA, so much of the period as falls before that date, and the rest of it, were separate accounting periods.