LLM3460 - Equalisation reserves for corporate and partnership members: anti-avoidance

ICTA88/S444BA (7) and (8) are anti-avoidance provisions which apply where arrangements have been made or transactions entered into solely or mainly to obtain a tax benefit. GIM7350 gives more details and an example of the type of ‘arrangements’ to which it might apply.

Although, in the context of equivalent Lloyd’s reserves, the reserves are constructed with a view to calculating the tax relief, this will not trigger the anti-avoidance provisions where the calculations follow straightforwardly from the business written. Merely establishing a record for tax relief calculation purposes will not to amount to ‘arrangements’ of the type contemplated, in circumstances where availability of the relief is clearly the purpose of FA09/S47 and SI2009/2039 - see the comments of Lord Nolan in IRC v Willoughby 70TC57 at 116-117.