Corporation Tax Act 2009 section 1220

Meaning of "unallowable purpose"

Section 1220 defines what constitutes an "unallowable purpose" for the holding of investments, which restricts the deduction of management expenses under section 1219.

• Investments are held for an unallowable purpose if they are not held for a genuine business or commercial purpose of the company, or if they relate to activities outside the charge to corporation tax.
• Investments held directly or indirectly in connection with arrangements whose main purpose (or one of whose main purposes) is to secure a tax advantage are treated as not held for a business or commercial purpose.
• A tax advantage includes obtaining a deduction or increased deduction for management expenses, or any other tax benefit as defined in section 1139 of CTA 2010.
• Where investments are held partly for allowable and partly for unallowable purposes, the apportionment between them must be made on a just and reasonable basis.