CTM08210 - Corporation Tax: management expenses: avoidance and unallowable purpose - general
Anti-avoidance provisions have been introduced to the management expenses regime in two stages, in FA04 and in FA07. FA04 introduced an unallowable purpose rule which considered the purpose for which investments were held. This has been expanded by FA07 so that holding investments for the purposes of avoidance is not a business or commercial purpose of the company and related expenses cannot therefore be expenses of management, CTA09/S1219 (2)(b) and S1220 (CTM08220).
FA07 also introduced a targeted anti-avoidance rule (TAAR), now at CTA09/S1248. Rather than look at the purpose of holding the investments it focuses on arrangements a company enters into and whether the main or one of the main purposes of these is the avoidance of tax, in which case expenditure incurred will not be expenses of management within the meaning of CTA09/S1219 (CTM08230 onwards).