What does section 81 of TIOPA 2010 allow HMRC to do regarding avoidance arrangements?

Section 81 empowers HMRC to counteract the effects of schemes or arrangements designed to artificially increase double taxation relief. Where all four conditions in section 82 are satisfied, HMRC may make adjustments by assessment, modification, claim disallowance, or other appropriate means to remove the avoidance benefit.

Does HMRC counteract the entire arrangement under section 81 TIOPA 2010?

No. Only those effects of the scheme or arrangement that are linked to the avoidance purpose under condition B are counteracted. Legitimate aspects of a transaction remain undisturbed. This targeted approach ensures that genuine commercial elements are preserved while the artificial inflation of double taxation relief is removed.

What types of adjustments can HMRC make under section 81 to counteract avoidance?

HMRC can raise or modify a tax assessment, amend or disallow a claim for relief, or use any other appropriate method. The legislation is deliberately broad, giving HMRC flexibility to address avoidance in whatever form it takes, ensuring effective counteraction of artificially inflated double taxation relief claims.

Who carries out the counteraction function under section 81 TIOPA 2010 in practice?

In practice, the counteraction function is carried out by officers of Revenue and Customs rather than the Commissioners for HMRC directly. Although originally assigned to the Commissioners, it has always been delegated to specialist officers. The current wording reflects this practical reality consistently with related legislation.

Taxation (International and Other Provisions) Act 2010 section 81

Countering effect of avoidance arrangements

Section 81 provides the mechanism for counteracting schemes or arrangements that have been designed to artificially increase double taxation relief.

Where all four conditions (A to D, set out in section 82) are met in relation to a person, HMRC may counteract the effects of the avoidance scheme or arrangement
Only those effects of the scheme that are linked to the avoidance purpose (condition B) are counteracted — not necessarily the entire arrangement
Adjustments can be made by way of an assessment, modification of an assessment, amendment or disallowance of a claim, or by any other appropriate means
These adjustments may be made by an officer of Revenue and Customs or by other parties as required

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