Revenue Scotland and Tax Powers Act 2014 section 64

Meaning of "artificial"

Section 64 defines when a tax avoidance arrangement is considered "artificial" for the purposes of the general anti-avoidance rule, setting out two alternative conditions and providing indicators to guide that assessment.

• An arrangement is artificial if it is not a reasonable course of action having regard to the principles and policy objectives of the relevant tax provisions, or if it exploits shortcomings in those provisions (Condition A).
• An arrangement is also artificial if it lacks genuine economic or commercial substance (Condition B), with indicators including circular transactions, steps that offset each other, and tax advantages not matched by real business risk.
• An arrangement that accords with established practice previously accepted by Revenue Scotland may indicate it is not artificial, though this is not conclusive.
• Where a tax avoidance arrangement forms part of wider arrangements, those wider arrangements must also be taken into account when assessing artificiality.