C3C1C2Part 7Derivative contracts

Annotations:
Modifications etc. (not altering text)
C3

Pt. 7 modified (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 601, 1184(1) (with Sch. 2)

C1

Pt. 7 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)

C2

Pt. 7 modified by 2007 c. 3, s. 809FZZ(8) (as inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2))

Chapter 11Tax avoidance

Unallowable purposes

691Meaning of “unallowable purpose”

1

For the purposes of sections 690 and 692, a derivative contract of a company has an unallowable purpose in an accounting period if the purposes for which, at times during that period, the company—

a

is a party to the contract, 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.

F11A

In subsection (1)(b) “related transaction”, in relation to a derivative contract, includes anything which equates in substance to a disposal or acquisition of the kind mentioned in section 596(1) (as read with section 596(2)).

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 derivative contract at any time, or

b

enters into a transaction which is a related transaction by reference to a derivative contract of the company.

4

For the purpose 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 derivative contract 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.

6

In this section “tax advantage” has the meaning given by F2section 1139 of CTA 2010 (meaning of “tax advantage”).