CFM38110 | Loan relationships: tax avoidance: unallowable purpose: overview

CTA09/S441-442

Overview

The ‘unallowable purpose rule’ at s441-442 is principally an anti-avoidance provision. The Financial Products Team (Business, Assets and International) is responsible for its overall policy and the Counter-Avoidance Technical Team for its operation.

The unallowable purpose rule is engaged in relation to a loan relationship where the loan relationship or related transaction has an ‘unallowable purpose’ at times in an accounting period. It provides that debits (or exchange gains credits) are not to be taken into account to the extent that, on a just and reasonable apportionment, the debits (or exchange gains credits) are attributable to the unallowable purpose.

Many of the core elements of the rule are a question of fact, and so will depend on the particular facts and circumstances of the arrangements being considered.

The rest of this guidance is structured as follows:

• CFM38115 sets out a technical summary of the rule, intended to be sufficient that it is possible to read this and then go straight to the practical guidance in many cases

• CFM38120 to CFM38167 set out the technical position on a number of points in more detail

• CFM38170 to CFM38200 contain practical guidance, including guidance at CFM38190 on situations where the unallowable purpose rule would or would not normally apply