Corporation Tax Act 2010 section 730D

Disallowance of deductible amounts: profit transfers

Section 730D restricts tax deductions where arrangements have been made to transfer profits into a company or a connected company, and those profits are then offset by deductible amounts that were already expected to arise.

• Where profit transfer arrangements increase a company's total profits or reduce its relievable losses, deductible amounts meeting two conditions (D and E) are denied as deductions from the relevant day onwards.
• Condition D requires that, on the relevant day, it was highly likely the deductible amount would be used as a deduction by the company or a connected company, judged by reference to arrangements made and events occurring up to that day.
• Condition E requires that a main purpose of the profit transfer arrangements is to bring the deductible amount into account as a deduction.
• Where the company would have had taxable profits even without the profit transfer arrangements, the disallowance is limited to a just and reasonable proportion of the deductible amount.