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HMRC internal manual

Company Taxation Manual

Particular topics: transactions in securities: corporation tax advantage

CTA10/PART15, S731 to S751, set out the legislation that provide 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’).

ITA07/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 invoking this legislation are taken by Clearance & Counteraction Team – see Tax Bulletin 46D of April 2000.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

The legislation is not within the ITSA or CTSA enquiry regimes.