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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: avoidance and unallowable purpose - general

Anti-avoidance provisions have been introduced to the management expenses regime in two stages, FA04 and 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 section 1220. (CTM08220)

FA07 has also introduced a targeted anti-avoidance rule (TAAR), now to be found in section 1248. This does not look at the purpose of holding the investments, rather where a company enters into arrangements where the main or one of the main purposes of the arrangements is the avoidance of tax, then expenditure incurred will not be expenses of management within the meaning of CTA09/S 1219 (CTM08230+).