BKM406800 - Banking surcharge: targeted anti-avoidance rule: anti-forestalling rule
F(No.2)A15/Schedule 3/para 14(12)& para16(11)
An anti-forestalling rule is included in the commencement rules for the surcharge and CFC chargeable profits: paragraph 12 of section 14 FA (No2) 15 for the surcharge and paragraph 11 of section 16 for CFC chargeable profits.
In each case the anti-forestalling rule is that for the purposes of the TAAR it does not matter whether arrangements are entered into before or after the legislation received Royal Assent.
Example:
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A banking company undertakes a reorganisation in October 2015 which results in the transfer of a profitable part of its business to a non-banking company.
- The business transferred out of the banking company represents 10 per cent of the surcharge profits that would otherwise be payable by the banking company in the year ending 31 December 2016.
- A main purpose of the arrangement is to reduce the banking company’s surcharge profits.
The reorganisation is an arrangement. The anti-forestalling rule means that it does not matter that the arrangement was entered into before the surcharge legislation received Royal Assent.
The arrangement results in a relevant transfer that is a transfer of a significant part of the surcharge profits for the chargeable accounting period ended 31 December 2016 to a non-banking company.
As a main purpose of the arrangement is to reduce the surcharge being charged on the banking company, the surcharge profits of that company for the accounting period ended 31 December 2016 are taken to be what they would have been had the relevant transfer not taken place.
The TAAR will need to be considered in each subsequent accounting period to establish if the arrangements entered into in October 2015 result in a the transfer of significant part of the surcharge profits that would otherwise be payable by the banking company for that accounting period.