CFM98010 – Corporate Finance Manual – HMRC Internal Manual



The Corporate Interest Restriction contains an Anti-Avoidance Plan Rule (RAAR) which has the effect of counteracting the tax benefits that may arise from certain avoidance arrangements. Arrangements must result in a tax benefit because a company:

  • eliminate a restriction on tax interest charges or reduce the amount of a restriction;
  • reactivate non-deductible tax interest expense amounts or increase the amount of a reactivation; or
  • modify the timing of any restriction or reactivation of tax interest charge amounts so that it is made in a different accounting period than in which it would otherwise have been made.

The ROAR will only apply if the arrangement gives rise to a tax benefit. The tax benefit is defined in s461(7) and includes

  • tax relief or increased tax relief;
  • a tax refund or a refund plus tax;
  • avoidance or reduction of taxation or tax assessment;
  • avoidance of potential tax liability;
  • a deferral of a tax payment or the advancement of a tax refund; and
  • avoidance of an obligation to deduct or account for tax.

The definition includes all taxes which are payable or treated as if they were corporation tax, including CFC fee, bank levy and surcharges such as bank surcharge. It also includes the diverted profits tax.

In forming an opinion on whether the tax benefit test is met, HMRC would take into account all the circumstances surrounding a particular arrangement.

If the tax benefit that may result from an arrangement is neutralized under other tax rules, the ROAR will not apply. For example, the CTA10/PT14 buy-down rules may apply to certain changes in the ownership of a company if they occur under an arrangement whose primary purpose is to have access to restricted interest as a future deduction.

The legislation only applies to arrangements whose main objective is to obtain a tax advantage. The legislation does not define what is meant by a primary purpose or one of the primary purposes. These expressions should have their normal meaning as ordinary English words. They must be applied objectively, taking into account the full context and facts.

It will generally be clear whether the attempt to obtain a tax advantage is the main purpose of a particular arrangement. This would be the case, for example, if the arrangement would not have been made at all without the possibility of obtaining the tax advantage, or if any non-tax objective was secondary to the advantage of obtaining the tax advantage. tax.


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