Corporation Tax Act 2009 section 931Q

Schemes involving diversion of trade income

Section 931Q is an anti-avoidance rule that prevents distributions from being treated as exempt where they have been artificially diverted away from a company that would have received them as taxable trading income.

• A distribution that would normally be exempt loses that exemption if it is received as part of a scheme to divert what would otherwise be another company's trading income
• The rule applies where the recipient and another company ("C") have entered into a scheme, and it is reasonable to assume the distribution would have been C's trading income had C received it
• The scheme must have as a main purpose the obtaining of exempt status for the distribution by routing it to the recipient instead of C
• When assessing whether the distribution would have been C's trading income, it must be assumed that C was a party to any of the underlying transactions giving rise to the distribution