Income Tax Act 2007 section 809S

Section 809Q: anti-avoidance

Section 809S is an anti-avoidance rule that prevents taxpayers from manipulating the composition of mixed funds to gain an income tax or capital gains tax advantage when income or gains are remitted to the UK.

• Where an arrangement has a main purpose of securing an income tax or capital gains tax advantage by manipulating what a mixed fund is treated as containing, HMRC can override the normal ordering rules and treat the fund as containing only such income or capital as is just and reasonable.
• "Arrangement" is defined very broadly to include any scheme, understanding, transaction, or series of transactions, whether or not legally enforceable.
• An income tax or capital gains tax "advantage" covers relief, repayment, avoidance or reduction of a charge, or avoidance of a possible assessment — and it does not matter whether the advantage is achieved through tax-free receipts or through deductions in computing profits.
• The rule targets attempts to re-categorise the contents of a mixed fund into lower-taxed categories (paragraphs (f) to (i) of section 809Q(4)), which represent items such as clean capital and income not otherwise taxable, so that remittances appear to come from those more favourably treated sources.