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HMRC internal manual

Business Income Manual

Anti-Avoidance provisions

The legislation contains anti-avoidance provisions for both individuals and companies. These provisions can be found at Section 5A CTA 2009 and Section 356OK CTA 2010 for corporation tax, and at Section 6A ITTOIA 2005 and Section 517K ITA 2007 for income tax.

The provisions apply if the company or individual enters into an arrangement where the main purpose, or one of the main purposes is to obtain a relevant tax advantage. Where this is the case the relevant tax advantage should be countered by means of adjustment.

An arrangement includes any agreement, understanding or scheme, transaction or series of transactions. It is not necessary for the arrangement to be legally enforceable. The definition of ‘arrangement’ does not include a double tax arrangement where the tax advantage is not contrary to the object and purpose of the double taxation arrangements.


Where there is a tax advantage adjustments should be made to counter it. How this should be done will be dependent on the circumstances. The adjustments can include assessment, the modification of an assessment, amendment or disallowance of a claim or another method.


An individual is contemplating disposal of shares which derive 60% of their value from land. Just prior to the disposal the individual injects additional capital into the company to ensure the 50% test at Section 517OD (1)(a) ITA 2007 is not met. The individual argues the profits should not be treated as trading profits as the 50% condition is not met. In this instance the individual has entered into an arrangement with a main purpose of obtaining a relevant tax advantage. The tax which would have been chargeable as a result of Part 9A ITA 2007 has been reduced so an adjustment should be made to counter the tax advantage.