Finance Act 2016

Meaning of “avoidance-related rule”

25 (1) In this Part of this Schedule “avoidance-related rule” means a rule in Category 1 or 2.

(2) A rule is in Category 1 if it refers (in whatever terms)—

(a) to the purpose or main purpose or purposes of a transaction, arrangements or any other action or matter, and

(b) to whether or not the purpose in question is or involves the avoidance of tax or the obtaining of any advantage in relation to tax (however described).

(3) A rule is also in Category 1 if it refers (in whatever terms) to—

(a) expectations as to what are, or may be, the expected benefits of a transaction, arrangements or any other action or matter, and

(b) whether or not the avoidance of tax or the obtaining of any advantage in relation to tax (however described) is such a benefit.

For the purposes of paragraph (b) it does not matter whether the reference is (for instance) to the “sole or main benefit” or “one of the main benefits” or any other reference to a benefit.

(4) A rule falls within Category 2 if as a result of the rule a person may be treated differently for tax purposes depending on whether or not purposes referred to in the rule (for instance the purposes of an actual or contemplated action or enterprise) are (or are shown to be) commercial purposes.

(5) For example, a rule in the following form would fall within Category 1 and within Category 2—

“Example rule

Section X does not apply to a company in respect of a transaction if the company shows that the transaction meets Condition A or B.

Condition A is that the transaction is effected—

(a)

for genuine commercial reasons, or

(b)

in the ordinary course of managing investments.”