CTM07525 - Corporation Tax: tax avoidance involving carried-forward losses: identifying the tax arrangements

Whether the conditions are met is judged by reference to ‘the tax arrangements’, and identifying the scope of what constitutes the extent of the tax arrangements will be a key consideration.

For example, it will be necessary to consider:

• Whether or not a profit arises as a consequence of the arrangements or for another reason,
• Whether or not a deduction arises in an accounting period as a consequence of the arrangements or for another reason,
• Whether the arrangements include transactions or steps inserted purely for the purposes of accessing carried-forward losses and creating a new deduction, and
• Whether or not to include non-tax value arising from wider arrangements.

Too narrow or too broad a scope could lead to an incorrect amount of value being attributed to either or the tax or non-tax values.

The scope of what is included in the tax arrangements must be judged on a case-by-case basis, and will likely involve fact finding discussions and/or correspondence between HMRC and the customer.