Corporation Tax Act 2009 section 486D

Exclusion where arrangement has no tax avoidance purpose

Section 486D provides an exclusion from the disguised interest rules where the company's involvement in an arrangement is not motivated by tax avoidance, and allows companies to elect into the rules voluntarily.

• The disguised interest rules do not apply to a return from an arrangement unless a main purpose of the company being party to it is to obtain a relevant tax advantage
• A company may voluntarily elect for the disguised interest rules to apply to a return that would otherwise be excluded by the no-tax-avoidance-purpose test
• Any such election must be made no later than when the arrangement begins to produce a return, cannot be made where section 486B already applies by virtue of subsection (6) of that section, and is irrevocable
• A relevant tax advantage means the return is produced in a form — such as a capital gain or dividend — that is taxed more favourably than if it were treated as income at the time it would be recognised under section 486B