What is an unallowable purpose under Corporation Tax Act 2010 section 800?

Under section 800, arrangements have an unallowable purpose if their main purpose, or one of their main purposes, is to enable a company to obtain a tax advantage rather than serving a genuine business or commercial purpose. This definition works alongside section 799 to restrict double taxation relief where such tax avoidance purposes are identified.

How does section 800 treat arrangements with both commercial and tax avoidance purposes?

Where arrangements have both genuine commercial reasons and a tax avoidance element, section 800 does not treat the entire arrangement as tainted. Only the portion attributable to the unallowable tax avoidance purpose is caught and may have relief restricted. The legitimate business portion of the arrangements remains unaffected by the provision.

Can obtaining a tax advantage count as a legitimate business purpose under section 800?

Section 800 limits this argument. Obtaining a tax advantage can only be regarded as a business or commercial purpose to the extent it is not the main purpose, or one of the main purposes, of the arrangements. This prevents companies from claiming that tax avoidance was simply good commercial planning and therefore a legitimate purpose.

What activities count when assessing a company's business purpose under section 800?

Only activities within the charge to corporation tax are taken into account when determining whether a company has a genuine business or commercial purpose. Activities falling outside the scope of corporation tax cannot be relied upon to demonstrate a legitimate commercial reason for the arrangements under this provision.

Corporation Tax Act 2010 section 800

Arrangements with an unallowable purpose

Section 800 defines when arrangements relating to double taxation relief are considered to have an "unallowable purpose", which can result in that relief being denied or restricted under section 799.

Arrangements have an unallowable purpose if their main purpose, or one of their main purposes, is to enable a company to obtain a tax advantage, rather than serving a genuine business or commercial purpose.
Where arrangements have both a legitimate business purpose and a tax avoidance purpose, only the portion attributable to the tax avoidance purpose is treated as having an unallowable purpose.
A company's business and commercial purposes are limited to activities that fall within the charge to corporation tax — purposes relating to activities outside that charge do not count.
Obtaining a tax advantage can only qualify as a business or commercial purpose to the extent that it is not the main purpose, or one of the main purposes, of the arrangements.

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