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Finance Act 1951

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36Restriction of certain transactions leading to avoidance of income tax or profits tax

(1)Subject to the provisions of this section, all transactions of the following classes (being classes of transactions which result or may result, directly or indirectly, in the avoidance of liability to income tax or the profits tax) shall be unlawful unless carried out with the consent of the Treasury, that is to say—

(a)for a body corporate resident in the United Kingdom to cease to be so resident; or

(b)for the trade or business or any part of the trade or business of a body corporate so resident to be transferred from that body corporate to a person not so resident; or

(c)for a body corporate so resident to cause or permit a body corporate not so resident over which it has control to create or issue any shares or debentures ; or

(d)except for the purpose of enabling a person to be qualified to act as a director, for a body corporate so resident to transfer to any person, or cause or permit to be transferred to any person, any shares or debentures of a body corporate not so resident over which it has control, being shares or debentures which it owns or in which it has an interest.

(2)Nothing in paragraph (c) of subsection (1) of this section shall apply to the giving to the bankers of the body corporate not resident in the United Kingdom of any security for the payment of any sum due or to become due from it to them by reason of any transaction entered into with it by them in the ordinary course of their business as bankers.

(3)Nothing in the said paragraph (c) shall apply to the giving by the body corporate not resident in the United Kingdom to an insurance company of any security for the payment of any sum due or to become due from that body corporate to that company by reason of any transaction entered into with that body corporate by that company in the ordinary course of that company's business by way of investment of its funds.

(4)Any consent granted by the Treasury under this section—

(a)may be given either specially (that is to say, so as to apply only to specified transactions of or relating to a specified body corporate) or generally (that is to say, so as not only to apply as aforesaid); and

(b)may, if given generally, be revoked by the Treasury ; and

(c)may in any case be absolute or conditional; and

(d)shall be published in such a way as to give any person entitled to the benefit of it an adequate opportunity of getting to know of it, unless in the opinion of the Treasury publication is not necessary for that purpose.

(5)Any person who, whether within or outside the United Kingdom, does or is a party to the doing of any act which to his knowledge amounts to or results in, or forms part of a series of acts which together amount to or result in, or will amount to or result in, something which is unlawful under subsection (1) of this section shall be guilty of an offence under this section, and in any proceedings in respect of such an offence against a director of the body corporate in question (that is to say, the body corporate which is or was resident in the United Kingdom) or against any person who was purporting to act in that capacity—

(a)it shall be presumed that he was a party to every act of that body corporate unless he proves that it was done without his consent or connivance; and

(b)it shall, unless the contrary is proved, be presumed that any act which in fact amounted to or resulted in, or formed part of a series of acts which together amounted to or resulted in or would amount to or result in, something which is unlawful under subsection (1) of this section was to his knowledge such an act.

(6)Any person who is guilty of an offence under this section shall be liable on conviction on indictment to imprisonment for not more than two years or to a fine not exceeding ten thousand pounds or to both, and proceedings in respect of such an offence alleged to have been committed by a person may be taken before the appropriate court in the United Kingdom having jurisdiction in the place where that person is for the time being:

Provided that where the person in question is the body corporate which is or was resident in the United Kingdom, the maximum amount of the fine shall be three times the total income tax and profits tax paid or payable by it for the last three years of assessment and the last three chargeable accounting periods ending before the commission of the offence, or ten thousand pounds, whichever is the greater.

(7)A body corporate shall be deemed for the purposes of this section to be resident or not to be resident in the United Kingdom according as the central management and control of its trade or business is or is not exercised in the United Kingdom:

Provided that if it is shown that it has been established as between the Crown and a body corporate for any income tax or profits tax purpose that the body corporate was resident or ordinarily resident in the United Kingdom for any year of assessment or chargeable accounting period, it shall be presumed, except so far as the contrary is proved, that that body corporate was resident in the United Kingdom for the purposes of this section at the beginning of that year of assessment or chargeable accounting period and that it continued to be so resident at all times thereafter.

(8)Where the functions of a body corporate consist wholly or mainly in the holding of investments or other property, the holding of the investments or property shall be deemed for the purposes of this section to be a business carried on by the body corporate.

(9)Notwithstanding anything in the preceding provisions of this section, in no event shall a mere transfer of assets by a body corporate not resulting in a substantial change in the character or extent of the trade or business of that body corporate be treated for the purpose of this section as a transfer of part of the trade or business thereof.

(10)In this section—

  • " share ", " debenture " and " director " have, in relation to any body corporate, the meanings respectively assigned to them by section four hundred and fifty-five of the Companies Act, 1948, in relation to a company ;

  • " control " (except in the expression " central management and control") means in relation to a body corporate, (the power of a person to secure, by means of the holding of shares or the possession of voting power in or in relation to that or any other body corporate, or by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate, that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of that person ;

  • " transfer ", in relation to shares or debentures, includes a transfer of any beneficial interest therein ;

  • " insurance company " means a body corporate lawfully carrying on business as an insurer, whether in the United Kingdom or elsewhere, and " funds " in relation to an insurance company means the funds held by it in connection with that business, and a body corporate shall not be deemed for the purposes of this section to cease to be resident in the United Kingdom by reason only that it ceases to exist.

(11)No proceedings for an offence under this section shall be instituted, in England or Wales, except by or with the consent of the Attorney General or, in Northern Ireland, except by or with the consent of the Attorney General for Northern Ireland:

Provided that this subsection shall not prevent the issue or execution of a warrant for the arrest of any person in respect of such an offence, or the remanding in custody or on bail of any person charged with such an offence.

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