Section 51 — Corporation Tax Act 2009: Relationship between rules prohibiting and allowing deductions

Relationship between rules prohibiting and allowing deductions 51 1 Any relevant permissive rule in this Part—

a has priority over any relevant prohibitive rule, but b is subject to—

i section 56 (car ... hire),

ii section 1288 (unpaid remuneration), iii section 1290 (employee benefit contributions),

iv section 1304 (crime-related payments). 1A But, if the relevant permissive rule would allow a deduction in calculating the profits of a trade in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

a does not have priority under subsection (1)(a),

and b is subject to any relevant prohibitive rule (and to the provisions mentioned in subsection (1)(b)).

2 In this section “ any relevant permissive rule in this Part ” means any provision of—

a Chapter 5 (trade profits: rules allowing deductions), apart from sections 62 to 67, b Chapter 7 (trade profits: gifts to charities etc),

c Chapter 9 (trade profits: other specific trades), or d Chapter 12 (deductions from profits: unremittable amounts), which allows a deduction in calculating the profits of a trade.

3 In this section “ any relevant prohibitive rule ”, in relation to any deduction, means any provision of this Part or Chapter 1 of Part 20 (apart from those mentioned in subsection (1)(b)) which might otherwise be read as—

a prohibiting or deferring the deduction, or b restricting the amount of the deduction.

4 In this section “ relevant tax avoidance arrangements ” means arrangements—

a to which the company carrying on the trade is a party, and b the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010). “ Arrangements ” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).