HMRC internal manual

Capital Gains Manual

CG44104 - Targeted rules to prevent income to capital converter schemes by companies - is a tax advantage a main purpose?

There is no one factor that determines whether the obtaining of a tax advantage is amain purpose of an arrangement. All of the circumstances in which the arrangements wereentered into need to be taken into consideration. Such circumstances might include:

  • the overall commercial objective (this should be considered from the perspective of not only the individual participants but also from any wider corporate group to which they belong - for these purposes a commercial objective does not include tax motivated reasons);
  • whether this objective is one which the parties involved might ordinarily be expected to have, and which is genuinely being sought;
  • whether the objective is being fulfilled in a straightforward way or
  • whether the introduction of any additional complex or costly steps would have taken place were it not for the tax advantage that could be obtained.