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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Debt cap: anti-avoidance rules: general: when the purpose test is applied

The main purpose filter is considered when a party enters into a scheme

Each of the three sets of anti-avoidance rules within Chapter 6 has a purpose filter. The anti-avoidance rules do not apply unless a party has a main purpose of entering into a scheme to secure a particular outcome that frustrates the intention of the debt cap rules.

Each of the three sets of rules considers whether any party has a main purpose of entering into a scheme to secure a particular outcome. The purpose of a party entering the scheme is considered, not the continued purpose of a party remaining involved in the scheme. So there is no need to consider the purpose of a party every accounting period.

Where there are changes, this may constitute either a new scheme or indicate that the extent of the existing scheme was not understood; in such circumstances the purposes of parties for entering into the scheme may need to be reconsidered.

CFM92645 considers what happens where there are changes.