C1Part 3Trading income

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Chapter 3Trade profits: basic rules

51Relationship between rules prohibiting and allowing deductions

1

Any relevant permissive rule in this Part—

a

has priority over any relevant prohibitive rule, but

b

is subject to—

i

section 56 (car F3... hire),

ii

section 1288 (unpaid remuneration),

iii

section 1290 (employee benefit contributions),

iv

section 1304 (crime-related payments).

F21A

But, if the relevant permissive rule would allow a deduction in calculating the profits of a trade in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

a

does not have priority under subsection (1)(a), and

b

is subject to any relevant prohibitive rule (and to the provisions mentioned in subsection (1)(b)).

2

In this section “any relevant permissive rule in this Part” means any provision of—

a

Chapter 5 (trade profits: rules allowing deductions), apart from sections 62 to 67,

b

Chapter 7 (trade profits: gifts to charities etc),

c

Chapter 9 (trade profits: other specific trades), or

d

Chapter 12 (deductions from profits: unremittable amounts),

which allows a deduction in calculating the profits of a trade.

3

In this section “any relevant prohibitive rule”, in relation to any deduction, means any provision of this Part or Chapter 1 of Part 20 (apart from those mentioned in subsection (1)(b)) which might otherwise be read as—

a

prohibiting or deferring the deduction, or

b

restricting the amount of the deduction.

F14

In this section “relevant tax avoidance arrangements” means arrangements—

a

to which the company carrying on the trade is a party, and

b

the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).