These provisions apply for income tax purposes. For details of the corporation tax regime see ·¡1.1440–E1.1444.
This filter is known as the unallowable purpose test and it applies if either condition A or condition B is met. Given the relatively straightforward language used, it is appropriate to quote verbatim excerpts from the legislation.
Condition A
Condition A is that, as a result of the transaction in securities or any one or more of the transactions in securities, a 'relevant person' receives relevant consideration in connection with:
- Ìý
(a)ÌýÌýÌýÌý the distribution, transfer or realisation of assets of a close company
- Ìý
(b)ÌýÌýÌýÌý the application of assets of a close company in discharge of liabilities, or
- Ìý
(c)ÌýÌýÌýÌý the direct or indirect transfer of assets of one close company to another close company,
and the relevant person does not pay or bear income tax on the consideration'1.
This restricts the application of the TiS income tax rules to close companies2, or to companies that would be
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