Corporation Tax Act 2010 section 356OH

Fragmented activities

Section 356OH prevents avoidance of the UK land transactions rules by splitting (fragmenting) development or profit-generating activities between a company that disposes of UK land and an associated person who contributes to the project.

• Where a company ("C") disposes of UK land meeting any of the conditions A to D in section 356OB, and an associated person ("R") has made a relevant contribution to the development of the land or to other activities directed at realising a profit from the disposal, the profit or gain is calculated as though C and R were the same person.
• Any payment made by R to C to meet or reimburse the corporation tax arising from this treatment is tax-neutral: it is ignored in computing profits or losses of both R and C for income tax and corporation tax purposes, and is not treated as a distribution.
• R is "associated" with C if R is connected with C under subsections (5) to (7) of section 1122 (read with section 1123), or if R is related to C within the meaning of section 356OT. The relevant association period runs from when the project activities begin until six months after the disposal.
• A contribution by R is "relevant" unless the profit R makes or stands to make from that contribution is insignificant relative to the size of the overall project; "contribution" is widely defined and includes professional services, financial contributions, and the assumption of risk.

---