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Income Tax Act 2007

Section 685: Exception where no tax avoidance object shown

2037.This section provides an exception to section 684 in certain circumstances. It is based on the escape clause in section 703(1) of ICTA.

2038.Subsection (1) provides that a person is taken out of section 684 if that person shows that both conditions A and B are met. These conditions are defined in subsections (2) and (3).

2039.Section 703(1) contains a reference to “the transaction or transactions being carried out”. In Greenberg v CIR (1971), 47 TC 240 HL (at pages 279 and 283) Lord Guest and Lord Simon of Glaisdale said that “carried out” in section 703(1) of ICTA meant “effected” as in section 707 of ICTA rather than “implemented”. Sections 685(2) and 701 (which is based on section 707 of ICTA) therefore both refer to transactions being “effected”. This is a verbal change to provide consistency. It does not change the law.

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