Section 31 | Relationship between rules prohibiting and allowing deductions

(1)Any relevant permissive rule in this Part—

(a)has priority over any relevant prohibitive rule in this Part, but

(b)is subject to section 36 (unpaid remuneration), section 38 (employee benefit contributions), section 48 (car ... hire) and section 55 (crime-related payments).

(1A)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 in this Part (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 (apart from sections 60 to 67),

(aa)Chapter 5A,

(b)Chapter 11, ...

(c)Chapter 13, or

(d)Chapter 17A,

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

(3)In this section “any relevant prohibitive rule in this Part”, in relation to any deduction, means any provision of this Part (apart from sections 36, 38, 48 and 55) which might otherwise be read as—

(a)prohibiting the deduction, or

(b)restricting the amount of the deduction.

(4)In this section “relevant tax avoidance arrangements” means arrangements—

(a)to which the person 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).