PART 1

Direct taxes

Corporation tax

Losses: counteraction of avoidance arrangements
19
1
Any loss-related tax advantage that would (in the absence of this section) arise from relevant tax arrangements is to be counteracted by the making of such adjustments as are just and reasonable.
2
Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of—
a
an assessment,
b
the modification of an assessment,
c
amendment or disallowance of a claim,
or otherwise.
3
For the purposes of this section arrangements are “relevant tax arrangements” if conditions A and B are met.
4
Condition A is that the purpose, or one of the main purposes, of the arrangements is to obtain a loss-related tax advantage.
5
Condition B is that it is reasonable to regard the arrangements as circumventing the intended limits of relief under the relevant provisions or otherwise exploiting shortcomings in the relevant provisions.
6
In determining whether or not condition B is met all the relevant circumstances are to be taken into account, including whether the arrangements include any steps that—
a
are contrived or abnormal, or
b
lack a genuine commercial purpose.
7
In this section “loss-related tax advantage” means a tax advantage as a result of a deduction (or increased deduction) under a provision mentioned in subsection (8).
8
The provisions are—
za
section 2A(1) of TCGA 1992 (allowable capital losses);
a
sections 457, 459, 461, 462, 463B, 463G and 463H of CTA 2009 (non-trading deficits from loan relationships);
b
section 753 of CTA 2009 (non-trading losses on intangible fixed assets);
c
section 1219 of CTA 2009 (management expenses etc);
d
sections 37, 45, 45A, 45B and 45F of CTA 2010 (deductions in respect of trade losses);
e
section 62(3) of CTA 2010 (losses of a UK property business);
f
Part 5 of CTA 2010 (group relief);
g
Part 5A of CTA 2010 (group relief for carried-forward losses);
h
sections 303B, 303C and 303D of CTA 2010 (non-decommissioning losses of ring-fence trades);
i
sections 124A, 124B and 124C of FA 2012 (carried-forward BLAGAB trade losses).
9
In this section—
- “arrangements” includes any agreement, understanding, scheme transaction or series of transactions (whether or not legally enforceable);
- “tax advantage” has the meaning given by section 1139 of CTA 2010.
10
This section has effect in relation to a tax advantage that relates (or would apart from this section relate) to an accounting period beginning on or after 1 April 2017 (regardless of when the arrangements in question were made).
11
Where a tax advantage would (apart from this subsection) relate to an accounting period beginning before 1 April 2017 and ending on or after that date (“the straddling period”)—
a
so much of the straddling period as falls before 1 April 2017, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
b
the extent (if any) to which the tax advantage relates to the second of those accounting periods is to be determined by apportioning amounts—
i
in accordance with section 1172 of CTA 2010 (time basis), or
ii
if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
12
In the case of a tax advantage as a result of a deduction (or increased deduction) under—
a
section 463H of CTA 2009,
b
section 62(3) of CTA 2010,
c
section 303B, 303C or 303D of CTA 2010, or
d
section 124A or 124C of FA 2012,
subsections (10) and (11) have effect as if the references to 1 April 2017 were to 13 July 2017.
13
In the case of a tax advantage as a result of a deduction (or increased deduction) under section 2A(1) of TCGA 1992, subsections (10) and (11) have effect as if the references to 1 April 2017 were to 1 April 2020.
S. 19(13) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020 of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 paras. 23(3), 42 (with Sch. 4 paras. 43-46)
S. 19(8)(za) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020 of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 paras. 23(2), 42 (with Sch. 4 paras. 43-46)