On 1 August 2016, HMRC published a “standard” response to non-statutory clearance applications regarding the new targeted anti-avoidance rule (TAAR) introduced by the Finance Act 2016 designed to prevent “phoenixism”. The TAAR addresses the use of voluntary liquidations to take cash out of a company (typically taxed as capital), with a subsequent resurrection of the same trade in another vehicle.

The letter confirms that HMRC will not provide clearance under the new rule, but states that guidance is to follow in due course. In the meantime, the letter gives some further insight as to the application of Conditions C and D of the TAAR. It confirms that Condition C (that the individual carries on the same or similar trade within two years of the distribution) is to be interpreted widely. Condition D (tax advantage main purpose requirement) then “narrows” the application of the rule.

The letter then gives some examples as to when the TAAR may, and may not, apply.

The letter can be viewed here.