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PART 4Anti-avoidance regulations

40Meaning of “artificial”

(1)A non-domestic rates avoidance arrangement is artificial if Condition A or B is met.

(2)Condition A is met if the entering into or carrying out of the arrangement is not a reasonable course of action in relation to the non-domestic rates provisions in question having regard to all the circumstances, including—

(a)whether the substantive results of the arrangement are consistent with—

(i)any principles on which those provisions are based (whether express or implied), and

(ii)the policy objectives of those provisions,

(b)whether the arrangement is intended to exploit any shortcomings in those provisions.

(3)Condition B is met if the arrangement lacks economic or commercial substance.

(4)Each of the following is an example of something which might indicate that a non-domestic rates avoidance arrangement lacks economic or commercial substance—

(a)the arrangement is carried out in a manner which would not normally be employed in reasonable business conduct,

(b)the legal characterisation of the steps in the arrangement is inconsistent with the legal substance of the arrangements as a whole,

(c)the arrangement includes elements which have the effect of offsetting or cancelling each other,

(d)transactions are circular in nature,

(e)the arrangement results in an advantage that is not reflected in the business risks undertaken.

(5)The examples given in subsection (4) are not exhaustive.

(6)Where a non-domestic rates avoidance arrangement forms part of any other arrangements, regard must also be had to those other arrangements.