Corporation Tax Act 2009 section 686

Tax avoidance etc.

Section 686 prevents the European cross-border merger rules in Chapter 10 from applying where the merger is driven by tax avoidance rather than genuine commercial reasons, and provides a clearance procedure through HMRC.

• Chapter 10 relief is denied if the merger is not carried out for genuine commercial reasons
• Relief is also denied if the merger is part of arrangements where a main purpose is avoiding corporation tax, capital gains tax or income tax
• Companies can apply to HMRC before the merger for clearance confirming the anti-avoidance rule will not block relief
• The clearance procedure follows the same process as that available for European cross-border transfers of business under the previous Chapter