Anti-avoidance rules and company liquidations

KEY POINTS

• Condition D of ITTOIA 2005 s 396B is relevant only if conditions A B and C are met.
• Is it reasonable to assume there is a tax advantage purpose?
• The lack of a statutory definition of ‘reasonable to assume’.
• When considering ‘purpose’ HMRC suggests it will rely on the decision in Mallalieu v Drummond.
• The taxpayer should know their main purpose.
• The object of the legislation is to counter ‘phoenixism’.
• The difficulty of ascertaining the scope of the legislation.

The first three conditions of ITTOIA 2005 s 396B (‘Distributions in a winding up’) are still causing many tax professionals to wonder how this targeted anti-avoidance rule (TAAR) will function in practice. This is despite conditions A  

B...