[HMRC Tax Bulletin 13, October 1994]


Some UK companies have used a company purchase scheme to avoid payment of substantial amounts of corporation tax. In a typical case the scheme works as follows:

a profitable company transfers its business to another group company, leaving itself only with cash sufficient to meet its unpaid corporation tax liability;

the profitable company – which is now worthless – is sold for a share (typically half) of the unpaid tax;

the new owner arranges for the company to participate in transactions which allegedly remove the company’s corporation tax liability;

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