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HMRC internal manual

Banking Manual

Banking surcharge: targeted anti-avoidance rule: meaning of relevant transfer - surcharge profits

CTA10/S269DN(2)

There is a relevant transfer if there is, in substance:

Example

  • A banking company undertakes a reorganisation in February 2016 which results in the transfer of a profitable part of its business to a non-banking company. 
  • The business transferred out of the banking company represents 10 per cent of the surcharge profits that would otherwise be payable by the banking company in the year ending 31 December 2016.
  • A main purpose of the arrangement is to reduce the banking company’s surcharge profits.

The reorganisation is an arrangement.

The arrangement results in a relevant transfer that is a transfer of a significant part of the surcharge profits for the chargeable accounting period ended 31 December 2016 to a non-banking company.

As a main purpose of the arrangement is to reduce the surcharge being charged on the banking company, the surcharge profits of that company for the accounting period ended 31 December 2016 are taken to be what they would have been had the relevant transfer not taken place.   

The TAAR will need to be considered in each subsequent accounting period to establish if the arrangements entered into in February 2016 result in the transfer of significant part of the surcharge profits that would otherwise be payable by the banking company for that accounting period.