FA96/SCH9/PARA13 is an anti-avoidance provision. Anti-Avoidance
Group (Investigation) has operational responsibility for the
domestic operation of this provision.
The provision disallows any debits where in an accounting period a loan relationship has an unallowable purpose. However, it disallows them only to the extent that, on a just and reasonable apportionment, the debits relate to the unallowable purpose.
For an accounting period, a loan relationship has an unallowable purpose if a company is party to it or has entered into a related transaction in relation to it for an unallowable purpose. (FA96/SCH9/PARA13 (2)). The term ‘related transaction’ is defined in FA96/S84. It can therefore potentially apply to any debits, for instance, representing:
However, it can only apply to the extent that, on a just and reasonable apportionment, the debit is attributable to the unallowable purpose.