188ÌåÓý

TCGA1992/S138

HMRC will not give statutory clearance to arrangements that seek to avoid a criminal, civil or regulatory risk or liability. Ìý

This is because HMRC consider that the “bona fide commercial reasonsâ€� test expressly requires genuine, “good faithâ€� commercial reasons for undertaking the exchange or scheme of reconstruction. Ìý

Where an applicant is aware of a specific risk or liability of this nature HMRC consider this to be material information. Failure to disclose this in a clearance application could result in the resulting notification being considered void.Ìý Whether a clearance given is void is ultimately a matter for the Tribunal, see CG52636.

For example â€� the X group has subsidiary Y that faces potential prosecution under Health and Safety legislation.Ìý The arrangements involve transferring the business of Y to a new company, Z, incorporated by the shareholders of X.Ìý X and Y will then be liquidated.Ìý This is potentially a scheme of reconstruction within TCGA92/S136.