FA02/SCH29/PARA77 provides that its provisions do not apply to an intangible asset to the extent that it is held for a purpose that is not a business or other commercial purpose of the company (see CIRD25030). In the avoidance field this rule is likely to be of application only in unusual circumstances. It is certainly possible to envisage circumstances where arrangements having as a main object the reduction of profits in the way described in CIRD48110 involve an asset held for commercial purposes.
It is important to distinguish cases where ordinary commercial
transactions and arrangements may have been accounted for in a way
that reduces taxable profits, from those where the transactions and
arrangements are themselves responsible for the reduction in
profits.
The issue in the first type of case is whether the accounting
treatment adopted is consistent with GAAP (see
CIRD30000 onwards). In the second type
of case the accounting treatment of the transactions in question
(in accordance with GAAP) may well do nothing to address the
perceived avoidance, and the issue will be solely whether the
anti-avoidance rule is in point.
The anti-avoidance rule is aimed at circumstances that are rather more elaborate than the simple purchase of an intangible asset at an inflated price (so increasing the deductions for sums written off the asset) or its sale at a depressed one. The arm’s length and market value rules should deal adequately with these situations. It is not credible that, in a stand-alone transaction with an independent party a company would sell an asset at undervalue or buy one at overvalue simply to reduce its tax bill.
