Chapter BKM406600
| Published date | 19 July 2017 |
| Record Number | BKM406600 |
CTA10/S269DN(1)(b) &TIOPA10/S371BI(3)(b)
Arrangements meet the TAAR if the main purpose, or one of the main purposes, of the arrangements is to avoid, or reduce, a banking company’s surcharge profits or its CFC chargeable profits.
The application of the main purpose part of the TAAR will be fact-dependent. It is expected that the company entering into an arrangement will know the purpose of that arrangement, and in particular whether avoiding or reducing the banking company’s surcharge profits or its CFC chargeable profits are a main purpose.
In relation to high-risk transactions, it is likely that HMRC will seek to test with the banking company the commercial and tax drivers motivating a particular arrangement.
Examples of transactions where HMRC may seek to apply the TAAR:
- A banking company transfers part of its trade to a non-banking company. The transfer results in significant reduction in the surcharge profits of the banking company for the chargeable period in which the transfer takes place.
- A banking company transfers part of its trade to a non-banking company. The transfer does not result in a significant reduction in the surcharge profits of the banking company for the chargeable period in which the transfer takes place but is forecast to result in a significant reduction in the surcharge profits of the banking company over the next few years.
- A banking company transfers part of its trade to a non-banking company as part of its restructuring to meet ring-fencing requirements and the transfer includes additional steps that were not necessary to achieve the regulatory purpose.
- A banking company arranges buy-to-let mortgages for individuals. It decides that from 1 January 2017 all new business will be written in a newly set up non-banking company. HMRC will consider this to be a relevant transfer if it leads to a significant reduction in the surcharge profits of the banking company. By way of contrast, if the newly set up non-banking company was offering buy to let mortgages for commercial customers and the banking company had not done this previously and did not have any existing plans to do so, this would not be a relevant transfer.
- A banking company...
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