Part 5Loan Relationships
Chapter 15Tax avoidance
Unallowable purposes and tax relief schemes
442Meaning of “unallowable purpose”
1
For the purposes of section 441 a loan relationship of a company has an unallowable purpose in an accounting period if, at times during that period, the purposes for which the company—
a
is a party to the relationship, or
b
enters into transactions which are related transactions by reference to it,
include a purpose (“the unallowable purpose”) which is not amongst the business or other commercial purposes of the company.
2
If a company is not within the charge to corporation tax in respect of a part of its activities, for the purposes of this section the business and other commercial purposes of the company do not include the purposes of that part.
3
Subsection (4) applies if a tax avoidance purpose is one of the purposes for which a company—
a
is a party to a loan relationship at any time, or
b
enters into a transaction which is a related transaction by reference to a loan relationship of the company.
4
For the purposes of subsection (1) the tax avoidance purpose is only regarded as a business or other commercial purpose of the company if it is not—
a
the main purpose for which the company is a party to the loan relationship or, as the case may be, enters into the related transaction, or
b
one of the main purposes for which it is or does so.
5
The references in subsections (3) and (4) to a tax avoidance purpose are references to any purpose which consists of securing a tax advantage for the company or any other person.