Corporation Tax Act 2010

Manufactured payments under arrangements with unallowable purpose

799 Manufactured payments under arrangements with unallowable purpose

(1) This section applies if—

(a) a manufactured payment falls to be made by a company in an accounting period in pursuance of any arrangements,

(b) the arrangements have an unallowable purpose at any time (see section 800),

(c) any of the manufactured payment is attributable to the unallowable purpose, and

(d) the company is not subject to another relevant tax relief restriction.

(2) The company is not entitled (whether as a result of any provision made in or under this Chapter, or otherwise), to any relevant tax relief, so far as the relief is in respect of, or referable to, so much of the manufactured payment as is attributable to the unallowable purpose.

(3) In this section “relevant tax relief” means—

(a) a deduction in calculating profits or gains for the purposes of corporation tax,

(b) a deduction from total profits,

(c) the bringing into account of any debit for the purposes of Part 5 of CTA 2009 (loan relationships), or

(d) the surrender of an amount by way of group relief.

(4) For the purposes of this section a company is subject to another relevant tax relief restriction if it is not entitled to a relevant tax relief in respect of, or referable to, the whole or any part of the manufactured payment as a result of any of the provisions specified in subsection (5).

(5) The provisions are—

(a) section 76(4)(d) of ICTA (expenses of insurance companies: unallowable purposes),

(b) section 441 of CTA 2009 (loan relationships with unallowable purposes), and

(c) section 1219(2)(b) of CTA 2009 (expenses of management of company’s investment business: unallowable purpose).

(6) How far the manufactured payment is attributable to the unallowable purpose must be determined by just and reasonable apportionment.

(7) For the meaning of “arrangements” see section 801(1).

800 Arrangements with an unallowable purpose

(1) This section applies for the purposes of section 799.

(2) Arrangements have an unallowable purpose at any time if at that time the purposes for which the company is a party to them include a purpose that is not among the business or other commercial purposes of the company.

(3) Arrangements also have an unallowable purpose at any time if at that time such a purpose is the only purpose, or one of the purposes, for which the company is a party to—

(a) any related transaction, or

(b) any transaction in pursuance of the arrangements.

(4) In section 799 “the unallowable purpose” in relation to any arrangements means such a purpose.

(5) The business and other commercial purposes of a company only include the purposes of any part of its activities in respect of which it is within the charge to corporation tax.

(6) Subsection (7) applies if a tax avoidance purpose is one of the purposes for which a company is at any time a party to—

(a) any arrangements,

(b) any related transaction in the case of any arrangements, or

(c) any transaction in pursuance of any arrangements.

(7) The tax avoidance purpose is taken to be a business or other commercial purpose of the company only if it is not the main purpose, or one of the main purposes, for which the company is party to the arrangements or transaction at that time.

(8) In this section “tax avoidance purpose” means any purpose that consists in securing a tax advantage for the company in question or any other person.

(9) Section 1139 (“tax advantage”) applies for the purposes of this section.

(10) For the meaning of other expressions used in this section, see section 801.

801 Sections 799 and 800: supplementary

(1) For the purposes of sections 799 and 800 and this section—

(a) “arrangements” includes schemes, arrangements and understandings (whether or not they are legally enforceable), and

(b) “manufactured payment” means—

(i) any manufactured dividend,

(ii) any manufactured interest (as defined in section 539(5) of CTA 2009),

(iii) any manufactured overseas dividend, and

(iv) any payment which, as a result of section 796(3) or 797(3), constitutes a fee.

(2) For the purposes of section 800, one or more transactions are treated as related transactions, in the case of any arrangements, if it would be reasonable to assume, from—

(a) the likely effect of the transactions,

(b) the circumstances in which the transactions are entered into or effected, or

(c) both that effect and those circumstances,

that none of the transactions would have been entered into or effected independently of the arrangements.

(3) Transactions may be related transactions, in the case of any arrangements, even if the transactions—

(a) are not between the same parties, or

(b) are not between the parties to the arrangements.