D9.103 Meaning of tax advantage
These provisions apply for corporation tax purposes. For details of the income tax regime see D9.116A–D9.119.
A tax advantage means1:
(a) a relief or increased relief from tax (this includes, for income tax purposes, a tax credit (prior to the repeal of tax credits from April 20162));
(b) a repayment or increased repayment of tax;
(c) the avoidance or reduction of a charge to tax or the avoidance of an assessment or a possible assessment to tax. It does not matter whether the avoidance or reduction is effected by receipts accruing in such a way that the recipient does not pay or bear income tax on them or obtains a deduction in calculating profits or gains.
One ingredient frequently seen in these cases is that the transaction that was carried out is much more complex than the alternative higher-tax transaction that HMRC might be suggesting is the proper comparator. So, for example, in Cleary v IRC3, discussed below, a sale of shares from one private company to another was the 'more complex' arrangement, compared to the simple payment of a dividend. And in IRC v Parker4, also discussed below, instead of a dividend there was the capitalisation of reserves followed by the redemption of that capital.
So, for there to be a tax advantage, there must be an alternative, usually simpler, transaction that would have achieved a similar result but with a higher tax bill.
The provisions contained in statute are wide ranging and are probably best
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