Section 398E | Restriction on artificial losses or reductions in profits

(1)This section applies if any expenditure incurred by A in carrying on the relevant activity has an unallowable purpose.

(2)In calculating the profits or losses of A for any accounting period for the purposes of corporation tax so much of the expenditure as, on a just and reasonable apportionment, is attributable to the unallowable purpose is to be left out of account.

(3)Expenditure has an unallowable purpose if the main purpose, or one of the main purposes, of A in incurring it is to obtain a relevant tax advantage (“the unallowable purpose”).

(4)A “relevant tax advantage” is—

(a)a reduction in the profits which, for the purposes of corporation tax, are attributable to the carrying on of the relevant activity by A,

(b)the creation of a loss which, for those purposes, is so attributable, or

(c)an increase in losses which, for those purposes, are so attributable.