3156.This section disallows expenses incurred in connection with arrangements to secure a tax advantage. It is based on section 75 of ICTA.
3157.Subsections (1) and (2) are the basic rule that the expenses are not allowed as management expenses. The wording of the subsections echoes that of section 1220, which treats investments held in connection with arrangements to secure a tax advantage as held for a disallowable purpose.
3158.Subsection (3) establishes an order of priority for “disallowable purposes” rules.
If the investments concerned are held for an unallowable purpose, the expenses are not expenses of management of the company’s investment business (section 1219(2)(b)).
Otherwise, if a manufactured payment is made in pursuance of arrangements that have an unallowable purpose, relief may be denied for the payment by paragraph 7A of Schedule 23A to ICTA.
If neither of these applies, this section may apply.