Tax Journal

Main purpose, or one of the main purposes

7 June 2018

The phrase ‘main purpose or one of the main purposes’ is widely used in UK tax law. A person may have more than one main purpose in entering into a transaction, and ‘a main purpose’ is a wider test than ‘the main purpose’. Cases including Snell, Lloyds TSB Equipment Leasing (No. 1) Ltd and Travel Document Service & Ladbroke Group International confirm that a transaction can have more than one main purpose and obtaining a tax advantage can be a main object of a transaction; however, in order for a purpose to be ‘main’ it must have a connotation of importance.

Jackie Wheaton (Moore Stephens) examines the widely-used phrase in UK tax law, particularly in relation to anti-avoidance sections.

The phrase ‘main purpose or one of the main purposes’ is widely used in UK tax law, particularly in the anti-avoidance sections.

For example, the HMRC’s Business Income Manual at BIM60560 refers to the conditions in CTA 2010 s 356OB relating to the corporation tax treatment of certain profits and gains realised from disposals concerned with land in the UK. The provisions apply generally if a person acquiring, holding or developing land realises a profit or gain from a disposal of any land in the UK and any of four conditions is met in relation to the land. Three of these conditions contain a test of whether the ‘main purpose or one of the main purposes’ for acquiring or developing the land, or the property deriving its value from land, was to realise a profit or gain from disposing of the land. Where the conditions are met, the profit or gain is treated as a profit of a trade of dealing in or developing UK land, and arising to the chargeable company or person.

The manual states that the main purpose test is a test of purpose, not of benefit or expectations. It is noted that a person may have more than one main purpose in entering into a transaction, and that ‘a main purpose’ is a wider test than requiring something to be ‘the main purpose’.

There is no definition of ‘main purpose’ in the legislation. HMRC’...

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