Corporation Tax Act 2009 section 347

Disapplication of Chapter where transferor party to avoidance

Section 347 prevents the continuity of treatment rules from applying where a transfer of an asset or liability is part of a tax avoidance arrangement involving the transferor company.

• This section applies where an asset or liability is expected to be transferred by the transferee company, and the normal continuity rules under sections 336 and 337 would otherwise apply to that transfer.
• The continuity rules allow transfers between companies to take place without triggering immediate tax consequences, effectively treating the transferee as stepping into the shoes of the transferor.
• However, if the transfer takes place under arrangements to which the transferor company is a party, and the main purpose of those arrangements is to avoid a tax liability, the continuity provisions are switched off entirely.
• The effect of disapplication is that the transfer is treated as a normal transaction for corporation tax purposes, meaning any gains, losses or other tax consequences that the continuity rules would have deferred or eliminated will instead arise in full.