CTM36835 - Particular topics: transactions in securities: Corporation Tax advantage

CTA10/PART15, S731 to S751, sets out the legislation that provides for counteracting Corporation Tax advantages obtained or obtainable by companies in respect of a transaction or transactions in securities.

Corporation Tax advantage means

  • a relief from Corporation Tax, or increased relief from Corporation Tax,
  • a repayment of Corporation Tax or increased repayment of Corporation Tax,
  • the avoidance or reduction of a charge to Corporation Tax or an assessment to Corporation Tax, or
  • the avoidance of a possible assessment to Corporation Tax.

The provision applies in respect of a transaction or transactions in securities if the company is in a position to obtain or has obtained a Corporation Tax advantage in circumstances where the avoidance of tax is effected

  • by receipts accrued in such a way that the recipient does not pay or bear Corporation Tax on them
  • by a deduction in calculating profits or gains.

The provisions to be applied are

  • CTA10/S736 – receipt of consideration representing company assets, future receipts or trading stock (‘circumstance C’)
  • CTA10/S737 – receipt of consideration in connection with relevant company distribution (‘circumstance D’)
  • CTA10/S738 – receipt of assets of relevant company (‘circumstance E’).

CTA10/S733 does not apply to a company in respect of a transaction in securities if the company shows that the transaction or transactions meet conditions A and B.

Condition A – the transaction is or the transactions are effected for genuine commercial reasons or in the ordinary course of making and managing investments.

Condition B – the main object or one of the main objects of the transaction or transactions is not enabling a Corporation Tax advantage or corporation tax advantages to be obtained.

For Corporation Tax purposes, clearance notification is given under CTA10/S748.

All decisions on applying this legislation are taken by Clearance and Counteraction Team – see CTM36805.