Intention may not reflect purpose

The taxpayer company RPL was incorporated in 2000 and wholly owned by the husband-and-wife directors Mr and Mrs W. The company owned premises used by a firm Reid & Fraser of which Mr W was a partner.

In addition the company owned other commercial and retail properties and during 2001 to 2003 made several unsuccessful bids to purchase more including holiday lets.

Until June 2010 when the company bought a residential apartment and commercial property the rent from Reid & Fraser constituted more than half of the business’s rental income.

Mr W claimed RPL was entitled to apply the small company rate to its profits for the corporation tax period ended 31 December 2008 on the basis the purpose of the company was the making of investments in land for...