Corporation Tax Act 2009 section 442

Meaning of "unallowable purpose"

Section 442 defines what constitutes an "unallowable purpose" for a company's loan relationship, which determines when tax relief may be restricted under section 441.

• A loan relationship has an unallowable purpose in an accounting period if any of the purposes for which the company is a party to it, or enters into related transactions, fall outside the company's genuine business or commercial purposes.
• A tax avoidance purpose — meaning any purpose of securing a tax advantage for the company or any other person — is treated as unallowable if it is the main purpose, or one of the main purposes, of the loan relationship or related transaction.
• Related transactions include anything that equates in substance to a disposal or acquisition of rights or liabilities under the loan relationship.
• Where a company carries on activities that are outside the charge to corporation tax, the purposes relating to those exempt activities are excluded from the company's recognised business and commercial purposes.