HMRC's Updated Unallowable Purpose Guidance – Helpful?

HMRC's updated unallowable purpose guidance is welcome. It provides some useful examples of "good" and "bad" fact patterns, helping to highlight when a tax advantage might be considered the main purpose of a transaction. It remains to be seen whether the guidance will be subject to further updates following the upcoming appeals in HMRC v Blackrock Holdco 5 LLC and HMRC v JTI Acquisition Company.

The "unallowable purpose" rule is an anti-avoidance provision found within the loan relationship rules. An unallowable purpose is a purpose that is not amongst the business or other commercial purposes of the company, which (for simplicity) includes the purpose of securing a tax advantage when that is the main purpose – or one of the main purposes – of entering into a transaction.