Law

Taxation (International and Other Provisions) Act 2010

United Kingdom · statute

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In force since 2026-03-18, as the publisher states.

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Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 675 provisions
  1. Title and introductory text
  2. 1 Overview of Act
  3. 2 Giving effect to arrangements made in relation to other territories
  4. 3 Arrangements may include retrospective or supplementary provision
  5. 4 Meaning of “double taxation” in sections 2 and 3
  6. 5 Orders under section 2: contents and procedure
  7. 6 The effect given by section 2 to double taxation arrangements
  8. 7 General regulations
  9. 8 Interpretation: “unilateral relief arrangements” means rules 1 to 9, etc
  10. 9 Rule 1: the unilateral entitlement to credit for non-UK tax
  11. 10 Rule 2: accrued income profits
  12. 11 Rule 3: interaction between double taxation arrangements and rules 1 and 2
  13. 12 Rule 4: cases in which, and calculation of, credit allowed for tax on dividends
  14. 13 Rule 5: credit for tax charged directly on dividend
  15. 14 Rule 6: credit for underlying tax on dividend paid to 10% associate of payer
  16. 15 Rule 7: credit for underlying tax on dividend paid to sub-10% associate
  17. 16 Rule 8: credit for underlying tax on dividend paid by exchanged associate
  18. 17 Rule 9: credit in relation to dividends for spared tax
  19. 18 Entitlement to credit for foreign tax reduces UK tax by amount of the credit
  20. 19 Time limits for claims for relief under section 18(2)
  21. 20 Foreign tax includes tax spared because of international development relief
  22. 21 Meaning of “the arrangements”, “the non-UK territory”, “foreign tax” etc
  23. 23 Time limits for claims for relief under section 22(2)
  24. 25 Credit not allowed if relief allowed against overseas tax
  25. 26 Credit not allowed under arrangements unless taxpayer is UK resident
  26. 27 Credit not allowed if person elects against credit
  27. 28 Unilateral relief for Isle of Man or Channel Islands tax
  28. 29 Unilateral relief for tax on income from employment or office
  29. 30 Unilateral relief for non-UK tax on non-resident's UK branch or agency etc
  30. 31 Calculation of income or gain where remittance basis does not apply
  31. 32 Calculation of amount received where UK tax charged on remittance basis
  32. 33 Limit on credit: minimisation of the foreign tax
  33. 34 Reduction in credit: payment by reference to foreign tax
  34. 35 Disallowed credit: use as a deduction
  35. 36 Amount of limit
  36. 37 Credit against tax on trade income: further rules
  37. 38 Credit against tax on royalties: further rules
  38. 39 Credit reduced by reference to accrued income losses
  39. 40 Amount of limit
  40. 41 Amount of limit
  41. 42 Amount of limit
  42. 43 Profits attributable to permanent establishments for purposes of section 42(2)
  43. 44 Credit against tax on trade income
  44. 45 Credit against tax on trade income: anti-avoidance rules
  45. 46 Applying section 44(2): asset in hedging relationship with derivative contract
  46. 47 Applying section 44(2): royalty income
  47. 48 Applying section 44(2): “portfolio” of transactions, arrangements or assets
  48. 49 Restricting section 44(3) if company is a bank or connected with a bank
  49. 49A Limit on credit in cases involving qualifying loan relationships of CFCs
  50. 49B Applying section 42(2) to non-trading credits from loan relationships etc
  51. 50 Tax for period on loan relationships
  52. 51 Tax for period on intangible fixed assets
  53. 52 General deductions
  54. 53 Earlier years' non-trading deficits on loan relationships
  55. 54 Non-trading debits on loan relationships
  56. 55 Current year's non-trading deficits on loan relationships
  57. 56 Non-trading debits on intangible fixed assets
  58. 57 Credit in respect of dividend: taking account of underlying tax
  59. 58 Calculation if dividend paid by non-resident company to resident company
  60. 59 Meaning of “relevant profits” in section 58
  61. 60 Underlying tax to be left out of account on claim to that effect
  62. 61 Calculation if section 58 does not apply
  63. 62 Meaning of “relevant profits” in section 61
  64. 63 Non-UK company dividend paid to 10% investor: relief for UK and other tax
  65. 64 Meaning of “dividend-paying chain” of companies
  66. 65 Relief for underlying tax paid by company lower in dividend-paying chain
  67. 66 Limitations on section 65(4)
  68. 67 Restriction of relief if underlying tax at rate higher than rate of corporation tax
  69. 68 Meaning of “avoidance scheme” in section 67
  70. 69 Dividends paid out of transferred profits
  71. 70 Underlying tax reflecting interest on loans
  72. 71 Foreign taxation of group as single entity
  73. 71A Circumstances in which section 71B applies
  74. 71B Reduction of foreign tax paid on profits of overseas PE
  75. 72 Application of section 73(1)
  76. 73 Carry-forward and carry-back of unrelieved foreign tax
  77. 74 Rules for carrying back unrelieved foreign tax
  78. 75 Two or more establishments treated as a single establishment
  79. 76 Former and subsequent establishments regarded as distinct establishments
  80. 77 Claims for relief under section 73(1)
  81. 78 Meaning of “overseas permanent establishment”
  82. 79 Time limits for action if tax adjustment makes credit excessive or insufficient
  83. 80 Duty to give notice that adjustment has rendered credit excessive
  84. 81 Countering effect of avoidance arrangements
  85. 82 Conditions for the purposes of section 81(1)
  86. 83 Schemes and arrangements referred to in section 82(4)
  87. 84 Section 83(2) and (4): schemes enabling attribution of foreign tax
  88. 85 Section 83(2) and (4): schemes about effect of paying foreign tax
  89. 85A Section 83(2) and (4): schemes involving deemed foreign tax
  90. 86 Section 83(2) and (4): schemes about claims or elections etc
  91. 87 Section 83(2) and (4): schemes that would reduce a person's tax liability
  92. 88 Section 83(2) and (4): schemes involving tax-deductible payments
  93. 89 Contents of counteraction notice
  94. 90 Consequences of counteraction notices
  95. 91 Counteraction notices given before tax return made
  96. 92 Counteraction notices given after tax return made
  97. 93 Amendment, closure notices and discovery assessments in section 92 cases
  98. 94 Information made available for the purposes of section 92(4)
  99. 95 Interpretation of sections 89 to 94
  100. 96 Companies with overseas branches: restriction of credit
  101. 97 Companies with more than one category of business: restriction of credit
  102. 97A Commercial allocation of relevant income to different categories of long-term business
  103. 98 Attribution for section 97 purposes if category is gross roll-up business
  104. 99 Allocation of expenses etc in calculations under section 35 of CTA 2009
  105. 100 First limitation for purposes of section 99(2)
  106. 101 Second limitation for purposes of section 99(2)
  107. 102 Interpreting sections 99 to 101 for life assurance or gross roll-up business
  108. 103 Interpreting sections 99 to 101 ...
  109. 104 Interpreting sections 100 and 101: amounts referable to category of business
  110. 105 Meaning of “chargeable gain”
  111. 106 Chapters 1 and 2 apply to capital gains tax separately from other taxes
  112. 107 Disregard of foreign tax referable to derivative contract
  113. 108 Disregard of foreign tax attributable to interest under a loan relationship
  114. 109 Repo cases in which no disregard under section 108
  115. 110 Stock-lending cases in which no disregard under section 108
  116. 111 When payment to beneficiary treated as arising from foreign source
  117. 112 Deduction from income for foreign tax (instead of credit against UK tax)
  118. 113 Deduction from capital gain for foreign tax (instead of credit against UK tax)
  119. 114 Time limits for action if tax adjustment makes reduction too large or too small
  120. 115 Duty to give notice that adjustment has rendered reduction too large
  121. 116 Introduction to section 117
  122. 117 Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets
  123. 118 Introduction to section 119
  124. 119 Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets
  125. 120 Introduction to section 121
  126. 121 Tax treated as chargeable in respect of relevant transactions
  127. 122 Tax treated as chargeable in respect of gains on transfer of non-UK business
  128. 123 Interpretation of sections 116 to 122
  129. 124 Giving effect to solutions to cases and mutual agreements resolving cases
  130. 125 Effect of, and deadline for, presenting a case
  131. 126 Meaning of “the Arbitration Convention”
  132. 127 Giving effect to agreements, decisions and opinions under the Convention
  133. 128 Disclosure under the Convention
  134. 128A Power by regulations to give effect to international obligations etc
  135. 128B Giving effect to requirements under section 128A regulations
  136. 128C Disclosure under international obligations etc
  137. 129 Disclosure where relief given overseas for tax paid in the United Kingdom
  138. 130 Interpreting provision about UK taxation of profits of foreign enterprises
  139. 130A Interpreting provision about UK taxation of pensions etc
  140. 131 Interpreting provision about interest influenced by special relationship
  141. 132 Interpreting provision about royalties influenced by special relationship
  142. 133 Special relationship rule for royalties: matters to be shown by taxpayer
  143. 134 Correcting assessments where relief is available
  144. 135 Relief under this Part: introductory
  145. 136 Interpretation of Part
  146. 137 Income tax credit etc for special withholding tax
  147. 138 Amount and application of the deemed tax under section 137
  148. 139 Capital gains tax credit etc for special withholding tax
  149. 140 Provisions about the deemed tax under section 139
  150. 141 Credit under Chapter 2 of Part 2 to be allowed first
  151. 142 Conditions for purposes of section 143
  152. 143 Taking account of special withholding tax in calculating income or gains
  153. 144 Issue of certificate
  154. 145 Refusal to issue certificate and appeal against refusal
  155. 146 Application of this Part
  156. 147 Tax calculations to be based on arm's length, not actual, provision
  157. 148 The “participation condition”
  158. 148A Participation condition treated as met: transfer pricing notice
  159. 149 “Actual provision” and “affected persons”
  160. 150 “Transaction” and “series of transactions”
  161. 151 “Arm's length provision”
  162. 152 Arm's length provision where actual provision relates to securities
  163. 153 Arm's length provision where security issued and guarantee given
  164. 153A Certain guarantees not capable of being arm’s length
  165. 153B Election for deemed guarantee
  166. 154 Interpretation of sections 153A and 153B
  167. 155 “Potential advantage” in relation to United Kingdom taxation
  168. 156 “Losses” and “profits”
  169. 157 Direct participation
  170. 158 Indirect participation: defined by sections 159 to 161
  171. 159 Indirect participation: potential direct participant
  172. 160 Indirect participation: one of several major participants
  173. 161 Indirect participation: involvement in financing arrangements
  174. 162 Indirect participation: sections 148 , 175 and 219(2): further financing cases
  175. 162A Agreements for common management
  176. 162B Arrangements to avoid participation condition
  177. 163 Meaning of “connected” in sections 159 and 161
  178. 164 Part to be interpreted in accordance with OECD principles
  179. 164A UK to UK Exemption
  180. 165 Exemption for dormant companies
  181. 166 Exemption for small and medium-sized enterprises
  182. 167 Small and medium-sized enterprises: exceptions from exemption
  183. 167A Small enterprises: exception from exemption: transfer pricing notice
  184. 168 Medium-sized enterprises: exception from exemption: transfer pricing notice
  185. 169 Giving of transfer pricing notices
  186. 170 Appeals against transfer pricing notices
  187. 171 Tax returns where transfer pricing notice given
  188. 172 Meaning of “small enterprise” and “medium-sized enterprise”
  189. 173 Meaning of “qualifying territory” and “non-qualifying territory”
  190. 173A Exchange gains and losses arising as a result of qualifying loan relationships and derivative contracts
  191. 174 Claim by the affected person who is not potentially advantaged etc
  192. 174A Claims under section 174 where disadvantaged person within charge to income tax
  193. 175 Application of section 174 where guarantee disallowed
  194. 176 Claims under section 174: advantaged person must have made return
  195. 177 Time for making, or amending, claim under section 174
  196. 178 Meaning of “return” in sections 176 and 177
  197. 179 Compensating payment if advantaged person is controlled foreign company
  198. 180 Application of section 174(2)(a) in relation to transfers of trading stock etc
  199. 181 Section 182 applies to claims where actual provision relates to borrowing
  200. 182 Making of section 182 claims
  201. 183 Giving effect to section 182 claims
  202. 184 Amending a section 182 claim if it is followed by relevant notice
  203. 185 Notice to potential claimants
  204. 186 Extending claim period if notice under section 185 not given or given late
  205. 187 Tax treatment if actual interest exceeds arm's length interest
  206. 187A Excess interest treated as a ... distribution
  207. 188 Double taxation relief by way of credit for foreign tax
  208. 189 Double taxation relief by way of deduction for foreign tax
  209. 190 Meaning of “relevant notice”
  210. 191 When sections 192 to 194 apply
  211. 192 Attribution to guarantor company of things done by borrower
  212. 192A Provision for cases within Part 6A
  213. 193 Interaction between claims under sections 174 and 192(1)
  214. 194 Claims under section 192(1): general provisions
  215. 195 Qualifying conditions for purposes of section 196
  216. 196 Balancing payments between affected persons: no charge to, or relief from, tax
  217. 197 Qualifying conditions for purposes of section 198
  218. 198 Balancing payments by guarantor to borrower: no charge to, or relief from, tax
  219. 199 Pre-conditions for making election under section 200
  220. 200 Election to pay tax rather than make balancing payments
  221. 201 Pre-conditions for making election under section 202
  222. 202 Election, in guarantee case, to pay tax rather than make balancing payments
  223. 203 Elections under section 200 or 202
  224. 204 Meaning of “capital market condition” in sections 199 and 201
  225. 205 Provision made or imposed between ring-fence trade and other activities
  226. 206 Meaning of “oil-related ring-fence trade” in sections 205 and 218
  227. 206A Modification of basic rule where allowances restricted for certain expenditure
  228. 207 Application of Part to unit trusts
  229. 208 The determinations which require the Commissioners' sanction
  230. 209 Determinations exempt from requirement for Commissioners' sanction
  231. 210 The requirement for the Commissioners' sanction
  232. 211 Restriction of right to appeal against Commissioners' approval
  233. 212 Appeals
  234. 213 Capital allowances
  235. 214 Chargeable gains
  236. 215 Manner of making adjustments to give effect to Part
  237. 216 Meaning of “the relevant activities”
  238. 217 Meaning of “control” and “firm”
  239. 217A Introduction
  240. 217B Unassessed transfer pricing profits
  241. 217C Conditions for being assessed under this Part at the UTPP rate
  242. 217D Effective tax mismatch outcome
  243. 217E Tax design condition
  244. 217F Preliminary notices
  245. 217G Representations by the company
  246. 217H Assessment
  247. 217I Amendment of company tax return by company
  248. 217J Amendment of assessment by HMRC
  249. 217K No postponement except before assessment is finalised for tax on same profits
  250. 217L Closure notices: rules relating to period for amendments
  251. 217M Appeal against assessment
  252. 217N Review of assessment
  253. 217P Settling of appeal by agreement
  254. 217Q No repayment
  255. 217R Exclusion of reliefs, deductions and set-offs
  256. 217S Assessment otherwise than at UTPP rate: no deduction for excess losses
  257. 217T Interpretation
  258. 218 Meaning of “advance pricing agreement”
  259. 219 Meaning of “associate” in section 218(2)(e)
  260. 220 Effect of agreement on party to it
  261. 221 Effect of revocation of agreement or breach of its conditions
  262. 222 Effect of agreement on non-parties
  263. 223 Application for agreement
  264. 224 Provision in agreement about years ended or begun before agreement made
  265. 225 Modification and revocation of agreement
  266. 226 Annulment of agreement for misrepresentation
  267. 227 Penalty for misrepresentation in connection with agreement
  268. 228 Party to agreement: duty to provide information
  269. 229 Modifications of agreement for double taxation purposes
  270. 230 Interpretation of Part: meaning of “Commissioners” and “officer”
  271. 259A Overview of Part
  272. 259B “Tax” means certain taxes on income and includes foreign tax etc
  273. 259BA References to equivalent provision to this Part under the law of a territory outside the United Kingdom
  274. 259BB Meaning of “payment”, “quasi-payment”, “payer”, “payee” etc
  275. 259BC The basic rules
  276. 259BD Chargeable companies in respect of CFCs and foreign CFCs
  277. 259BE Meaning of “hybrid entity”, “investor” and “investor jurisdiction”
  278. 259BF Meaning of “permanent establishment”
  279. 259C Overview of Chapter
  280. 259CA Circumstances in which the Chapter applies
  281. 259CB Hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent
  282. 259CC Interpretation of section 259CB
  283. 259CD Counteraction where the payer is within the charge to corporation tax for the payment period
  284. 259CE Counteraction where a payee is within the charge to corporation tax
  285. 259D Overview of Chapter
  286. 259DA Circumstances in which the Chapter applies
  287. 259DB Meaning of “hybrid transfer arrangement”, “underlying instrument” etc
  288. 259DC Hybrid transfer deduction/non-inclusion mismatches and their extent
  289. 259DD Interpretation of section 259DC
  290. 259DE The financial trader exclusion
  291. 259DF Counteraction where the payer is within the charge to corporation tax for the payment period
  292. 259DG Counteraction where a payee is within the charge to corporation tax
  293. 259E Overview of Chapter
  294. 259EA Circumstances in which the Chapter applies
  295. 259EB Hybrid payer deduction/non-inclusion mismatches and their extent
  296. 259EC Counteraction where the hybrid payer is within the charge to corporation tax for the payment period
  297. 259ED Counteraction where a payee is within the charge to corporation tax
  298. 259F Overview of Chapter
  299. 259FA Circumstances in which the Chapter applies
  300. 259FB Counteraction of the excessive PE deduction
  301. 259FC Meaning of excessive PE inclusion income
  302. 259G Overview of Chapter
  303. 259GA Circumstances in which the Chapter applies
  304. 259GB Hybrid payee deduction/non-inclusion mismatches and their extent
  305. 259GC Counteraction where the payer is within the charge to corporation tax for the payment period
  306. 259GD Counteraction where the investor is within the charge to corporation tax
  307. 259GE Counteraction where a hybrid payee is an LLP
  308. 259H Overview of Chapter
  309. 259HA Circumstances in which the Chapter applies
  310. 259HB Multinational payee deduction/non-inclusion mismatches and their extent
  311. 259HC Counteraction of the multinational payee deduction/non-inclusion mismatch
  312. 259I Overview of Chapter
  313. 259IA Circumstances in which the Chapter applies
  314. 259IB Counteraction where the investor is within the charge to corporation tax
  315. 259IC Counteraction where the hybrid entity is within the charge to corporation tax
  316. 259ICA Deemed dual inclusion income for the purposes of section 259IC
  317. 259ID Section 259ID income for the purposes of section 259IC
  318. 259J Overview of Chapter
  319. 259JA Circumstances in which the Chapter applies
  320. 259JB Counteraction where mismatch arises because of a dual resident company
  321. 259JC Counteraction where mismatch arises because of a relevant multinational and the UK is the parent jurisdiction
  322. 259JD Counteraction where mismatch arises because of a relevant multinational and is not counteracted in the parent jurisdiction
  323. 259JE Meaning of excessive PE inclusion income
  324. 259K Overview of Chapter
  325. 259KA Circumstances in which the Chapter applies
  326. 259KB Meaning of “dual territory double deduction”, “excessive PE deduction” and “PE jurisdiction”
  327. 259KC Denial of the relevant deduction in relation to the imported mismatch payment
  328. 259KD Deductions from dual inclusion income
  329. 259KE Limit on reduction under section 259KC
  330. 259KF Provision for cases within Part 4
  331. 259L Adjustments where suppositions cease to be reasonable
  332. 259LA Deduction from taxable total profits where an amount of ordinary income arises late
  333. 259LB Adjustments in light of later treatment for accounting purposes
  334. 259ZM Overview of Chapter
  335. 259ZMA Circumstances in which Chapter applies
  336. 259ZMB Claims for allocation of DII surplus
  337. 259ZMC The unused part of the DII surplus
  338. 259ZMD The unused part of the DII shortfall
  339. 259ZME Groups of companies
  340. 259ZMF Meaning of “dual inclusion income” and “counteraction amount”
  341. 259M Countering the effect of avoidance arrangements
  342. 259MA Meaning of “transparent fund”
  343. 259MB Application of Chapters 3, 4, 5 and 7
  344. 259MC Application of Chapter 9
  345. 259MD Application of Chapter 11
  346. 259N Meaning of “financial instrument”
  347. 259NA Meaning of “relevant investment fund”
  348. 259NB Control groups
  349. 259NC Related persons
  350. 259ND Meaning of “50% investment” and “25% investment”
  351. 259NDA Meaning of “qualifying institutional investor” etc
  352. 259NE Treatment of a person who is a member of a partnership
  353. 259NEZA Securitisation companies
  354. 259NEA Priority
  355. 259NEB Relevant debt relief circumstances: introductory
  356. 259NEC Release of debts
  357. 259NED Release of connected companies debts
  358. 259NEE Release of connected companies debts during creditor’s insolvency
  359. 259NEF Corporate rescue: debt released shortly after connection arises
  360. 259NF Definitions
  361. 354 Power to make regulations about tax treatment of participants
  362. 355 Meaning of “offshore fund”
  363. 356 Meaning of “mutual fund”
  364. 357 Exceptions to definition of “mutual fund”
  365. 358 Meaning of “relevant income-producing asset”
  366. 359 Power to make regulations about exceptions to definition of “mutual fund”
  367. 360 Treatment of umbrella arrangements
  368. 361 Treatment of arrangements comprising more than one class of interest
  369. 362 Meaning of “participant” and “participation”
  370. 363 Meaning of “umbrella arrangements” and “part of umbrella arrangements”
  371. 363A Residence of undertakings for collective investment in transferable securities and alternative investment funds
  372. 364 Oil activities
  373. 365 Alternative finance arrangements
  374. 366 Power to amend the alternative finance provisions
  375. 367 Leasing arrangements: finance leases and loans
  376. 368 Sale and lease-back etc
  377. 369 Factoring of income etc
  378. 370 UK representatives of non-UK residents
  379. 371 Miscellaneous relocations
  380. 371AA Overview of Part
  381. 371BA Introduction to the CFC charge
  382. 371BB The CFC charge gateway
  383. 371BC Charging the CFC charge
  384. 371BD Chargeable companies
  385. 371BE Companies which are managers of offshore funds etc
  386. 371BF Companies which are participants in offshore funds
  387. 371BG Companies holding shares as trading assets etc
  388. 371BH Companies carrying on BLAGAB
  389. 371BI Banking companies
  390. 371CA Does Chapter 4 apply?
  391. 371CB Does Chapter 5 apply?
  392. 371CC Incidental non-trading finance profits: the 5% rule
  393. 371CD Incidental non-trading finance profits: the further 5% rule
  394. 371CE Does Chapter 6 apply?
  395. 371CEA Section 371CE: meaning of “group treasury company”
  396. 371CF Does Chapter 7 apply?
  397. 371CG Does Chapter 8 apply?
  398. 371DA Introduction to Chapter
  399. 371DB The steps
  400. 371DC Exclusion: UK activities a minority of total activities
  401. 371DD Exclusion: economic value
  402. 371DE Exclusion: independent companies' arrangements
  403. 371DF Exclusion: trading profits (the basic rule)
  404. 371DG Exclusion: trading profits (business premises condition)
  405. 371DH Exclusion: trading profits (income condition)
  406. 371DI Exclusion: trading profits (management expenditure condition)
  407. 371DJ Exclusion: trading profits (IP condition)
  408. 371DK Exclusion: trading profits (export of goods condition)
  409. 371DL Exclusion: trading profits (anti-avoidance)
  410. 371EA The basic rule
  411. 371EB UK activities
  412. 371EC Capital investment from the UK
  413. 371ED Arrangements in lieu of dividends etc to UK resident companies etc
  414. 371EE Leases to UK resident companies etc
  415. 371FA The basic rule
  416. 371FB Qualifying loan relationships
  417. 371FC Loans from foreign permanent establishments of UK resident companies
  418. 371FD Exclusion: banking business
  419. 371FE Exclusion: insurance business
  420. 371GA The basic rule
  421. 371HA The basic rule
  422. 371IA The basic rule
  423. 371IB Loans funded out of qualifying resources
  424. 371IC What is the “qualifying value” of “relevant pre-acquisition funds or other assets”?
  425. 371ID The 75% exemption
  426. 371IE The “matched interest profits” exemption
  427. 371IF Determining the profits of a qualifying loan relationship
  428. 371IG What is a “qualifying loan relationship”?
  429. 371IH Exclusions from definition of “qualifying loan relationship”
  430. 371II Power to amend definitions
  431. 371IJ Claims
  432. 371JA Introduction to Chapter
  433. 371JB The basic rule
  434. 371JC When does an exempt period begin?
  435. 371JD How long is an exempt period?
  436. 371JE Adjustment of profits passing through the CFC charge gateway
  437. 371JF Anti-avoidance
  438. 371JG Amendment of company tax returns
  439. 371KA Introduction to Chapter
  440. 371KB The basic rule
  441. 371KC How to determine the territory in which a CFC is resident
  442. 371KD What is “the threshold amount”?
  443. 371KE Category A income: the basic rule
  444. 371KF Category A income: permanent establishments in excluded territories
  445. 371KG Category B income
  446. 371KH Category C income
  447. 371KI Category D income
  448. 371KJ The IP condition
  449. 371LA Introduction to Chapter
  450. 371LB The basic rule
  451. 371LC Anti-avoidance
  452. 371MA Introduction to Chapter
  453. 371MB The basic rule
  454. 371MC Anti-avoidance
  455. 371NA Introduction to Chapter
  456. 371NB The basic rule
  457. 371NC Reductions to “the local tax amount”
  458. 371ND What are “designer rate tax provisions”?
  459. 371NE How to determine “the corresponding UK tax”
  460. 371OA Application of Chapter
  461. 371OB Provision about interpretation
  462. 371OC “Relevant interests” of UK resident companies
  463. 371OD “Relevant interests” of persons related to UK resident companies
  464. 371OE Other “relevant interests”
  465. 371PA What is “creditable tax”?
  466. 371QA Application of Chapter
  467. 371QB Provision about interpretation
  468. 371QC The basic rules
  469. 371QD Apportionments to be made in proportion to shareholding
  470. 371QE Indirect shareholdings
  471. 371QF Variable shareholdings
  472. 371QG Anti-avoidance
  473. 371RA Overview of Chapter
  474. 371RB Legal and economic control
  475. 371RC Legal and economic control: the 40% rule
  476. 371RD Legal and economic control: supplementary provision
  477. 371RE Control determined by reference to accounting standards
  478. 371RF Power to amend section 371RE etc
  479. 371RG Companies in which a UK resident company has more than a 50% investment
  480. 371SA Overview of Chapter
  481. 371SB What are “assumed taxable total profits” and “assumed total profits”?
  482. 371SC What are “the corporation tax assumptions”?
  483. 371SD UK residence etc
  484. 371SE Close company
  485. 371SF Claims and elections
  486. 371SG Disapplication of assumption in section 371SF(1)
  487. 371SH Elections under section 9A of CTA 2010
  488. 371SI Modification of sections 6 and 7 of CTA 2010
  489. 371SJ Elections for leases to be treated as long funding leases
  490. 371SK Intangible fixed assets
  491. 371SKA Restrictions on certain deductions: deductions allowances
  492. 371SL Group relief etc
  493. 371SLA Corporate interest restriction
  494. 371SM Capital allowances
  495. 371SN Unremittable overseas income
  496. 371SO Tax advantages
  497. 371SP Disguised interest: application of Chapter 2A of Part 6 of CTA 2009
  498. 371SQ Shares accounted for as liabilities: application of section 521C of CTA 2009
  499. 371SR Double taxation relief: countering effect of avoidance arrangements
  500. 371TA The basic rule
  501. 371TB How to determine the territory in which the CFC is resident
  502. 371TC Elections and designations about residence
  503. 371UA Introduction to Chapter
  504. 371UB Application of the Taxes Acts to the CFC charge
  505. 371UBA Payments in respect of a charge on a banking company: information to be provided
  506. 371UC Just and reasonable apportionments
  507. 371UD Relief against sum charged
  508. 371UE Appeals affecting more than one person
  509. 371UF Recovery of sum charged from other UK resident companies
  510. 371VA Definitions
  511. 371VB Accounting periods
  512. 371VC Accounting profits
  513. 371VD Adjustments to accounting profits
  514. 371VE Cell companies etc
  515. 371VF Connected persons etc
  516. 371VG Finance profits
  517. 371VH Interests in companies
  518. 371VI Property business profits
  519. 371VIA Relevant finance leases
  520. 371VJ Regulations
  521. 372 Overview
  522. 373 Meaning of “subject to interest restrictions”, “the total disallowed amount” etc
  523. 374 Interest restriction returns
  524. 375 Disallowance of deductions: full interest restriction return submitted
  525. 376 Disallowance of deductions: no return, or non-compliant return, submitted
  526. 377 Disallowance of deductions: identification of the tax-interest amounts to be left out of account
  527. 378 Disallowed tax-interest expense amounts carried forward
  528. 379 Reactivation of interest
  529. 380 Reactivation of deductions: identification of the tax-interest amounts to be brought into account
  530. 381 Set-off of disallowances and reactivations in the same accounting period
  531. 382 The tax-interest expense amounts of a company
  532. 383 Relevant loan relationship debits
  533. 384 Relevant derivative contract debits
  534. 385 The tax-interest income amounts of a company
  535. 386 Relevant loan relationship credits
  536. 387 Relevant derivative contract credits
  537. 388 Double taxation relief
  538. 389 The “net tax-interest expense” or “net tax-interest income” of a company
  539. 390 The worldwide group's aggregate net tax-interest expense and income
  540. 391 Meaning of “impairment loss”
  541. 391A Amounts capitalised in carrying value of intangible fixed assets
  542. 392 The interest capacity of a worldwide group for a period of account
  543. 393 Amount of interest allowance for a period that is “available” in a later period
  544. 394 When interest allowance is “used”
  545. 395 Amount of interest allowance for a period of account that is “unexpired” in later period
  546. 395A Carry forward of interest allowance: new holding company
  547. 396 The interest allowance of a worldwide group for a period of account
  548. 397 Basic interest allowance calculated using fixed ratio method
  549. 398 Basic interest allowance calculated using group ratio method
  550. 399 The group ratio percentage
  551. 400 The debt cap
  552. 400A Carry forward of excess debt cap: new holding company
  553. 401 Effect of group ratio (blended) election on group ratio percentage
  554. 402 Effect of group ratio (blended) election on group ratio debt cap
  555. 403 Calculations under sections 401 and 402: investor worldwide groups
  556. 404 Meaning of “investor”, “related party investor” and investor's “share”
  557. 405 The aggregate tax-EBITDA of a worldwide group
  558. 406 The tax-EBITDA of a company
  559. 407 Amounts not brought into account in determining a company's tax-EBITDA
  560. 408 Excluded relevant intangibles debits and excluded relevant intangibles credits
  561. 409 Double taxation relief
  562. 410 Net group-interest expense
  563. 411 “Relevant expense amount” and “relevant income amount”
  564. 412 Section 411: interpretation
  565. 413 Adjusted net group-interest expense
  566. 414 Qualifying net group-interest expense
  567. 415 Section 414: interpretation
  568. 416 Group-EBITDA
  569. 417 The capital (expenditure) adjustment
  570. 418 The capital (fair value movement) adjustment
  571. 419 The capital (disposals) adjustment
  572. 420 Derivative contracts subject to fair value accounting
  573. 421 Derivative contracts subject to fair value accounting: interpretation
  574. 422 Group-EBITDA (chargeable gains) election
  575. 423 Capitalised interest brought into account for tax purposes in accordance with GAAP
  576. 424 Employers' pension contributions
  577. 424A Unpaid employees’ remuneration
  578. 425 Employee share acquisitions
  579. 426 Changes in accounting policy
  580. 427 Group interest and group-EBITDA
  581. 428 Section 427: associated worldwide groups
  582. 429 Meaning of “non-consolidated associate”
  583. 430 Interest allowance (consolidated partnerships) election
  584. 431 Interpretation of Chapter
  585. 432 Overview of Chapter
  586. 433 Meaning of “qualifying infrastructure company”
  587. 434 Elections under section 433
  588. 435 Group elections modifying the operation of sections 433 and 434
  589. 436 Meaning of “qualifying infrastructure activity”
  590. 437 Section 436: supplementary
  591. 438 Exemption for interest payable to third parties etc
  592. 438A Application of section 438: certain creditors treated as qualifying infrastructure companies
  593. 439 Exemption in respect of certain pre-13 May 2016 loan relationships
  594. 440 Loans etc made by qualifying infrastructure companies to be ignored
  595. 441 Tax-EBITDA of qualifying infrastructure company to be nil
  596. 442 Amounts of qualifying infrastructure company left out of account for other purposes
  597. 443 Interest capacity for group with qualifying infrastructure company etc
  598. 444 Joint venture companies
  599. 445 Joint venture groups
  600. 446 Joint ventures: supplementary
  601. 447 Partnerships and other transparent entities
  602. 448 Decommissioning
  603. 449 Minor definitions for purposes of this Chapter
  604. 450 Banking companies
  605. 451 Oil and gas
  606. 452 Real Estate Investment Trusts
  607. 453 Insurance entities
  608. 454 Members of Lloyd's
  609. 454A Investments held by investment managers
  610. 455 Shipping companies subject to tonnage tax
  611. 456 Creditor relationships of companies determined on basis of fair value accounting
  612. 457 Elections under section 456: deemed debits and credits
  613. 458 Co-operative and community benefit societies etc
  614. 459 Charities
  615. 460 Long funding operating leases and finance leases
  616. 461 Counteracting effect of avoidance arrangements
  617. 462 Expressions relating to “related parties”: introduction
  618. 463 Whether a person is generally a “related party” of another
  619. 464 Meaning of “25% investment”
  620. 465 Attribution of rights and interests
  621. 466 Certain loan relationships etc to be treated as made between related parties
  622. 467 Holdings of debt and equity in same proportions
  623. 468 Debts with same rights where unrelated parties hold more than 50%
  624. 469 Debt restructuring
  625. 470 Ordinary independent financing arrangements by banks and others
  626. 471 Loans made by relevant public bodies
  627. 472 Finance leases granted before 20 March 2017
  628. 473 Meaning of “a worldwide group”, “ultimate parent” etc
  629. 474 Interpretation of section 473: “relevant entity”
  630. 475 Meaning of “non-consolidated subsidiary” and “consolidated subsidiary”
  631. 476 Continuity of identity of a worldwide group through time
  632. 477 Treatment of stapled entities
  633. 478 Treatment of business combinations
  634. 479 “Financial statements” of a worldwide group
  635. 480 “Period of account” of worldwide group
  636. 481 Actual financial statements not drawn up on acceptable principles
  637. 482 Actual financial statements drawn up on acceptable principles but consolidating wrong subsidiaries
  638. 483 Actual financial statements covering more than one worldwide group
  639. 484 No actual financial statements: ultimate parent draws up financial statements
  640. 485 No actual financial statements: other cases
  641. 486 Election altering period of account deemed under section 485
  642. 487 Actual financial statements ignored if for too long a period or too late
  643. 488 Meaning of “IAS financial statements”
  644. 489 References to amounts recognised in financial statements
  645. 490 Meaning of “relevant accounting period”
  646. 491 Meaning of “relevant public body”
  647. 492 Meaning of “UK group company”
  648. 493 Embedded derivatives
  649. 494 Other interpretation
  650. 495 Financial statements: different treatment by group or members
  651. 496 Parties to capital market arrangements
  652. 497 Change in accounting standards
  653. 498 Regulations
  654. 499 Orders and regulations
  655. 500 Abbreviated references to Acts
  656. 501 Minor and consequential amendments
  657. 502 Transitional provisions and savings
  658. 503 Repeals and revocations
  659. 504 Index of defined expressions
  660. 505 Extent
  661. 506 Commencement
  662. 507 Short title
  663. Schedule A1 Assessment of unassessed transfer pricing profits: partnerships and Lloyd’s syndicates
  664. SCHEDULE 1 Oil activities: new Chapter 16A of Part 2 of ITTOIA 2005
  665. SCHEDULE 2 Alternative finance arrangements
  666. SCHEDULE 3 Leasing arrangements: finance leases and loans
  667. SCHEDULE 4 Sale and lease-back etc: new Part 12A of ITA 2007
  668. SCHEDULE 5 Factoring of income etc: new Chapters 5B and 5C of Part 13 of ITA 2007
  669. SCHEDULE 6 UK Representatives of non-UK residents
  670. SCHEDULE 7 Miscellaneous relocations
  671. SCHEDULE 7A Interest restriction returns
  672. SCHEDULE 8 Minor and consequential amendments
  673. SCHEDULE 9 Transitionals and savings etc
  674. SCHEDULE 10 Repeals and revocations
  675. SCHEDULE 11 Index of defined expressions used in Parts 2 to 8

Proposed changes to this act

No one has proposed a change to this act yet.

675 provisions

183 Giving effect to section 182 claims

(1) A section 182 claim is not a claim within paragraph 57 or 58 of Schedule 18 to FA 1998 (company tax returns, assessments and related matters). (2) Accordingly, paragraph 59 of that Schedule (application of Schedule 1A to TMA 1970) has effect in relation to a section 182 claim. (3) If— (a) a section 182 claim is made before a calculation within section 176(1) has been made, (b) such a calculation is subsequently made, and (c) the claim is not consistent with the calculation, the affected persons are to be treated as if (instead of the claim actually made) a claim had been made that was consistent with the calculation. (4) All such adjustments are to be made (including by the making of assessments) as are required to give effect to subsection (3). (5) Subsection (4) has effect despite any limit on the time within which any adjustment may be made.

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184 Amending a section 182 claim if it is followed by relevant notice

(1) Subsection (2) applies if— (a) a section 182 claim is made, (b) a return is subsequently made by the advantaged person on the basis mentioned in section 176(1), and (c) a relevant notice (see section 190) taking account of such a determination as is mentioned in section 176(3)(b) is subsequently given to the advantaged person. (2) If any amendment of the claim is appropriate in consequence of the determination contained in the relevant notice, the amendment may be made by— (a) the disadvantaged person, or (b) the advantaged person. (3) If an amendment under subsection (2) is made by the advantaged person it is to be taken to be made on behalf of the disadvantaged person. (4) Any amendment under subsection (2) must be made within the period mentioned in section 177(3). (5) Subsection (4) has effect subject to section 186(3) (which provides for the extension of the period for making an amendment).

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185 Notice to potential claimants

(1) Subsection (2) applies if— (a) a relevant notice (see section 190) is given to any person, (b) the notice, or anything contained in it, takes account of a transfer-pricing determination, and (c) it appears to an officer that there is a person (“DP”) who is or may be a disadvantaged person by reference to the subject-matter of the determination. (2) The officer must give to DP a notice containing particulars of the determination. (3) A contravention of subsection (2) does not affect the validity— (a) of the relevant notice, or (b) of any determination to which the notice relates. (4) For the purposes of this section, a person is a disadvantaged person by reference to the subject-matter of a transfer-pricing determination if (and only if) the person— (a) is entitled, in consequence of the making of the determination, to make or amend a claim under section 174, or (b) will be entitled, because of section 212(3), to be a party to any proceedings on an appeal relating to the determination. (5) In this section— “officer” means officer of Revenue and Customs, and “transfer-pricing determination” means a determination of an amount that is to be brought into account for tax purposes in respect of— any assumption made under section 147(3) or (5), or any advance-pricing-agreement assumptions (see section 222(6)).

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186 Extending claim period if notice under section 185 not given or given late

(1) If there is a contravention of section 185(2), the Commissioners must consider whether, as a result of the contravention, any person has been prejudiced with respect to the making or amendment of a claim under section 174. (2) Subsection (3) applies if— (a) there is a contravention of section 185(2), or (b) a notice required by section 185(2) is given after the relevant notice concerned. (3) The Commissioners may, if they think fit, treat the period for the making or amendment of a claim under section 174 in the case concerned as extended by such further period as appears to them to be appropriate. (4) In this section “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

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187 Tax treatment if actual interest exceeds arm's length interest

(1) Subsection (6) applies if the following conditions are met. (2) Condition A is that interest is paid by any person under the actual provision. (3) Condition B is that section 147(3) or (5) applies in relation to the actual provision. (4) Condition C is— (a) that the amount (“ALINT”) of interest that would have been payable under the arm's length provision is less than the amount of interest paid under the actual provision, or (b) that there would not have been any interest payable under the arm's length provision (so that ALINT is nil). (5) Condition D is that the person receiving the interest paid under the actual provision makes— (a) a claim under section 174, or (b) a section 182 claim. (6) The interest paid under the actual provision, so far as it exceeds ALINT— (a) is not to be regarded as chargeable under Chapter 2 of Part 4 of ITTOIA 2005, (b) is not subject to the provisions of Part 15 of ITA 2007 (deduction of income tax at source), and (c) is not required to be brought into account under Part 5 of CTA 2009 (loan relationships) as a non-trading credit.

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187A Excess interest treated as a ... distribution

(1) Subsection (2) applies if Conditions A to C in section 187 are met in circumstances where section 174A prevents a claim under section 174. (2) The interest paid under the actual provision, so far as it exceeds ALINT, is treated for the purposes of the Income Tax Acts as a dividend paid by the company which paid the interest (and, accordingly, as a ...distribution).

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188 Double taxation relief by way of credit for foreign tax

(1) Subsection (2) applies if— (a) a claim is made under section 174, and (b) the disadvantaged person (“DP”) is entitled on that claim to make a calculation, or to have an adjustment made, on the basis that the arm's length provision was made or imposed instead of the actual provision. (2) Assumptions A and B are to be made in DP's case in relation to any credit for foreign tax which DP has been, or may be, given— (a) under any double taxation arrangements, or (b) under section 18(1)(b) and (2) (relief under unilateral relief arrangements). (3) Subsection (2) has effect subject to section 189(2). (4) Assumption A is that the foreign tax paid or payable by DP does not include any amount of foreign tax which would not be or have become payable were it to be assumed for the purposes of that tax that the arm's length provision had been made or imposed instead of the actual provision. (5) Assumption B is that the amount of DP's relevant profits in respect of which DP is given credit for foreign tax does not include the amount (if any) by which DP's relevant profits are treated as reduced in accordance with section 174. (6) If any adjustment is required to be made for the purpose of giving effect to any of the preceding provisions of this section— (a) it may be made by setting the amount of the adjustment against any relief or repayment to which DP is entitled in pursuance of DP's claim under section 174, and (b) nothing in the Tax Acts limiting the time within which any assessment is to be or may be made or amended prevents that adjustment from being so made. (7) In subsection (5) “DP's relevant profits” means the profits arising to DP from the carrying on of the relevant activities (see section 216). (8) In this section— “double taxation arrangements” means arrangements that have effect under section 2(1) (double taxation relief by agreement with territories outside the United Kingdom), and “foreign tax” means— any tax under the law of a territory outside the United Kingdom, or any amount that, for the purposes of any double taxation arrangements, is to be treated as if it were tax under the law of a territory outside the United Kingdom. (9) In determining for the purposes of this section whether a person is— (a) under any double taxation arrangements, or (b) under section 18(1)(b) and (2), to be given credit for foreign tax, ignore any requirement that a claim is made before such a credit is given.

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189 Double taxation relief by way of deduction for foreign tax

(1) Subsection (2) applies if— (a) a claim is made under section 174, (b) the disadvantaged person (“DP”) is entitled on that claim to make a calculation, or to have an adjustment made, on the basis that the arm's length provision was made or imposed instead of the actual provision, (c) the application of that basis in the calculation of DP's profits or losses for any chargeable period involves a reduction in the amount of any income, and (d) that income is also income that is to be reduced in accordance with section 112(1) (deduction for foreign tax where no credit allowed). (2) If this subsection applies— (a) the reduction mentioned in subsection (1)(c) is to be treated as made before any reduction under section 112(1), and (b) tax paid, in the place in which any income arises, on so much of that income as is represented by the amount of the reduction mentioned in subsection (1)(c) is to be disregarded for the purposes of section 112(1). (3) If any adjustment is required to be made for the purpose of giving effect to any of the preceding provisions of this section— (a) it may be made by setting the amount of the adjustment against any relief or repayment to which DP is entitled in pursuance of DP's claim under section 174, and (b) nothing in the Tax Acts limiting the time within which any assessment is to be or may be made or amended prevents that adjustment from being so made.

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190 Meaning of “relevant notice”

In this Chapter “relevant notice” means— (a) a closure notice under section 28A(1) of TMA 1970 in relation to an enquiry into a return under section 8 or 8A of TMA 1970, (b) a closure notice under section 28B(1) of TMA 1970 in relation to an enquiry into a partnership return, (c) a closure notice under paragraph 32 of Schedule 18 to FA 1998 in relation to an enquiry into a company tax return, (d) a notice under section 30B(1) of TMA 1970 amending a partnership return, (e) a notice of an assessment under section 29 of TMA 1970, (f) a notice of a discovery assessment under paragraph 41 of Schedule 18 to FA 1998 (which includes a discovery assessment under that paragraph as applied by paragraph 52 of that Schedule), or (g) a notice of a discovery determination under paragraph 41 of Schedule 18 to FA 1998.

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191 When sections 192 to 194 apply

(1) Sections 192 to 194 apply if— (a) one of the affected persons (“the borrower”) has borrowing liabilities, (b) those liabilities are to any extent the subject of a guarantee provided by a company (“the guarantor company”), (c) in calculating the profits and losses of the borrower for tax purposes, the amounts to be deducted in respect of interest or other amounts payable in respect of the borrowing are required to be reduced (whether or not to nil) under section 147(3) or (5), and (d) the reduction is a result of provision for the guarantee not being regarded as arm’s length in accordance with section 153A (certain guarantees not capable of being arm’s length). (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) In this Chapter— “borrowing”, “guarantee” and “implicit support” have the meanings they have in sections 153A and 153B (see section 154); “the borrowing transaction” means the transaction mentioned in subsection (1)(a); “the guarantor company” has the meaning given by subsection (1)(b), “the borrower” has the meaning given by subsection (1)(a), and ...

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192 Attribution to guarantor company of things done by borrower

(1) On the making of a claim, the guarantor company is, to the extent of the reduction mentioned in subsection (1)(c) of section 191 (so far as it meets the condition in subsection (1)(d) of that section), to be treated for all purposes of the Taxes Acts as if it (and not the borrower)— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) was the person that owed the borrowing liabilities under the borrowing transaction, and (c) had paid any interest or other amounts paid under it by the borrower. (2) Subsection (1) is subject to subsection (3). (3) Where the borrower’s liabilities under the borrowing transaction are the subject of two or more guarantees (whether or not provided by the same person), TD must not exceed TR, where— TD is the total of the amounts brought into account by the guarantor companies because of subsection (1), and TR is the total amount of the reductions within section 191(1)(c). (4) Provision about claims under subsection (1) is made by— section 193 (interaction between claims under subsection (1) and claims under section 174), and section 194 (general provision about claims under subsection (1)). (5) In subsection (1) “the Taxes Acts” has the meaning given by section 118(1) of TMA 1970. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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192A Provision for cases within Part 6A

(1) Subsection (2) applies to the extent that— (a) there is an amount to be deducted in respect of a payment by the borrower in respect of the borrowing transaction, (b) that amount is required to be reduced (whether or not to nil) under section 147(3) or (5), (c) the guarantor company makes a claim under section 192(1) in respect of that reduction, and (d) as regards the payment, provision in Part 6A would, but for the reduction, apply in relation to the tax treatment of the borrower (“the relevant tax treatment”). (2) The relevant tax treatment is to apply in relation to the guarantor company.

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193 Interaction between claims under sections 174 and 192(1)

(1) In this section “the loan provision” means the actual provision made or imposed between— (a) the borrower, and (b) another person (“the lender”) which is provision in relation to the borrowing transaction. (2) Subsections (3) and (4) apply if— (a) the guarantor company makes a claim under section 192(1), and (b) the lender makes a claim under section 174 in relation to the loan provision. (3) In determining the arm's length provision for the purposes of section 174(2)(a) in relation to the lender’s claim, additional amounts are to be brought into account as credits corresponding to the debits that fall to be brought into account by the guarantor company because of section 192(1). (4) If— (a) the lender makes its claim under section 174 before the guarantor company makes its claim under section 192(1), and (b) the calculation on which the lender’s claim is based does not comply with subsection (3), the guarantor company's claim is to be disallowed.

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194 Claims under section 192(1): general provisions

(1) A claim under section 192(1) may be made— (a) by the guarantor company, (b) if there are two or more guarantor companies, by those companies acting together, or (c) by the borrower. (2) A claim made under section 192(1) by the borrower is to be taken to be made on behalf of the guarantor company or companies. (3) Sections 175 to 177 apply in relation to a claim under section 192(1) made by or on behalf of any person or persons as they apply in relation to a claim under section 174 made by the disadvantaged person, but taking— (a) references in sections 176 and 177 to the advantaged person as references to the borrower, and (b) the reference in section 177 to the disadvantaged person as a reference to the guarantor company or companies.

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195 Qualifying conditions for purposes of section 196

(1) Conditions A to D are “the qualifying conditions” for the purposes of section 196. (2) Condition A is that only one of the affected persons (“the advantaged person”) is a person on whom a potential advantage in relation to United Kingdom taxation is conferred by the actual provision. (3) Condition B is that the other affected person (“the disadvantaged person”) is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities (see section 216). (4) Condition C is that— (a) a payment (the “balancing payment”) is made, or (b) two or more payments (the “balancing payments”) are made, to the advantaged person by the disadvantaged person. (5) Condition D is that the sole or main reason for making that payment or those payments is that section 147(3) or (5) applies.

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196 Balancing payments between affected persons: no charge to, or relief from, tax

(1) If each of the qualifying conditions (see section 195) is met, subsection (2) applies— (a) to the balancing payment if, or so far as, its amount does not exceed the available compensating adjustment, or (b) to the balancing payments if, or so far as, their total amount does not exceed the available compensating adjustment. (2) Any payment to which this subsection applies— (a) is not to be taken into account in calculating profits or losses of either of the affected persons for the purposes of income tax or corporation tax, and (b) is not for any purpose of the Corporation Tax Acts to be regarded as a distribution. (3) In subsection (1) “the available compensating adjustment” means the difference between PL1 and PL2 where— PL1 is the profits and losses of the disadvantaged person calculated for tax purposes on the basis of the actual provision, and PL2 is the profits and losses of the disadvantaged person as (or as they would be) calculated for tax purposes on a claim under section 174. (4) For the purposes of subsection (3), take PL1 or PL2— (a) as a positive amount if it is an amount of profits, and (b) as a negative amount if it is an amount of losses. (5) In this section, the following expressions have the meaning given by section 195— “the balancing payment” and “the balancing payments”, and “the disadvantaged person”.

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197 Qualifying conditions for purposes of section 198

(1) Conditions A to F are the qualifying conditions for the purposes of section 198. (2) Condition A is that one of the affected persons ... has borrowing liabilities. (3) Condition B is that those liabilities are to any extent the subject of a guarantee provided by a company (“the guarantor company”). (4) Condition C is that, in calculating the profits and losses of the borrower for tax purposes, the amounts to be deducted in respect of interest or other amounts payable in respect of the borrowing are required to be reduced (whether or not to nil) under section 147(3) or (5). (5) Condition D is that that reduction is required because of section section 153A. (6) Condition E is that— (a) a payment (the “balancing payment”) is made, or (b) two or more payments (the “balancing payments”) are made, by the guarantor company to the borrower. (7) Condition F is that the sole or main reasons for making that payment or those payments are— (a) that section 147(3) or (5) applies because of section section 153A, or (b) that sections 192 to 194 apply. (8) For the purposes of this Chapter, “borrowing” and “guarantee” have the meanings they have in sections 153A and 153B (see section 154).

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198 Balancing payments by guarantor to borrower: no charge to, or relief from, tax

(1) If each of the qualifying conditions (see section 197) is met, subsection (2) applies to the balancing payments made by all of the guarantors if, or so far as, the total amount of those payments does not exceed the total amount of the reductions within section 197(4) that are result of the application of section 153A. (2) Payments to which this subsection applies— (a) are not to be taken into account in calculating for tax purposes the profits or losses of the guarantor company or companies or the borrower, and (b) are not for any purpose of the ... Tax Acts to be regarded as distributions. (3) In this section, the following expressions have the meaning given by section 197— “the balancing payments”, “the guarantor company”, and ...

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199 Pre-conditions for making election under section 200

(1) Conditions A to E are the pre-conditions for the purposes of section 200. (2) Condition A is that both of the affected persons are companies. (3) Condition B is that only one of the affected persons (“the advantaged person”) is a person on whom a potential advantage in relation to United Kingdom taxation is conferred by the actual provision. (4) Condition C is that the other affected person (“the disadvantaged person”) is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities (see section 216). (5) Condition D is that the actual provision is provision in relation to borrowing (“the relevant borrowing”). (6) Condition E is that the capital market condition is met (see section 204). (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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200 Election to pay tax rather than make balancing payments

(1) If each of the pre-conditions (see section 199) is met, the disadvantaged person may make an election— (a) to make no balancing payment within section 196 to the advantaged person in connection with section 147(3) or (5) applying because of section 153A in relation to the relevant borrowing in a chargeable period, but (b) instead, to undertake sole responsibility for discharging the advantaged person's liability to tax for that period so far as resulting from section 147(3) or (5) applying because of section 153A in relation to the relevant borrowing. (2) Section 203 contains provision about the making and effect of elections under this section. (3) In this section, the following expressions have the meaning given by section 199— “the advantaged person”, “the disadvantaged person”, and “the relevant borrowing”.

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201 Pre-conditions for making election under section 202

(1) Conditions A to E are the pre-conditions for the purposes of section 202. (2) Condition A is that both of the affected persons are companies. (3) Condition B is that only one of the affected persons (“the advantaged person”) is a person on whom a potential advantage in relation to United Kingdom taxation is conferred by the actual provision. (4) Condition C is that the other affected person (“the disadvantaged person”) is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities (see section 216). (5) Condition D is that the actual provision is made or imposed by means of a series of transactions which include— (a) borrowing (“the relevant borrowing”) by one of the affected persons ..., and (b) the provision of a guarantee by the other affected person. (6) Condition E is that the capital market condition is met (see section 204). (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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202 Election, in guarantee case, to pay tax rather than make balancing payments

(1) If each of the pre-conditions (see section 201) is met, the disadvantaged person may make an election— (a) to make no balancing payment within section 198 to the advantaged person in connection with section 147(3) or (5) applying because of section 153A in relation to the relevant borrowing in a chargeable period, but (b) instead, to undertake sole responsibility for discharging the advantaged person's liability to tax for that period so far as resulting from section 147(3) or (5) applying because of section 153A in relation to the relevant borrowing. (2) Section 203 contains provision about the making and effect of elections under this section. (3) In this section, the following expressions have the meaning given by section 201— “the advantaged person”, “the disadvantaged person”, and “the relevant borrowing”.

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203 Elections under section 200 or 202

(1) In this section “election” means election under section 200 or 202. (2) An election must be made by being included (whether by amendment or otherwise) in the disadvantaged person's company tax return for the chargeable period in which the relevant borrowing first occurs. (3) An election is irrevocable. (4) An election has effect in relation to each of the affected persons for the chargeable period in which the relevant borrowing first occurs and all subsequent chargeable periods. (5) An election is of no effect if the Commissioners for Her Majesty's Revenue and Customs give the disadvantaged person a notice refusing to accept the election. (6) A notice under subsection (5) may be given only after a notice of enquiry in respect of the company tax return containing the election has been given to the disadvantaged person. (Paragraph 24 of Schedule 18 to FA 1998 makes provision about notices of enquiry in respect of company tax returns.) (7) If an election has effect in relation to an accounting period of the advantaged person, the tax mentioned in subsection (1)(b) of the section under which the election is made— (a) is recoverable from the disadvantaged person as if it were an amount of corporation tax due and owing from that person, and (b) is not recoverable from the advantaged person. (8) In this section— “the advantaged person”, “the disadvantaged person” and “the relevant borrowing”— in relation to an election under section 200, have the meaning given by section 199, and in relation to an election under section 202, have the meaning given by section 201, and “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to FA 1998, as read with paragraph 4 of that Schedule. (9) For the purposes of subsections (2) and (4), if the relevant borrowing first occurred in a chargeable period beginning before 1st April 2004 it is to be treated as if it had first borrowed in the chargeable period beginning on that date.

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204 Meaning of “capital market condition” in sections 199 and 201

(1) For the purposes of section 199(6) or 201(6), the capital market condition is met if— (a) the actual provision forms part of a capital market arrangement, (b) the capital market arrangement involves the issue of a capital market investment, (c) the securities that represent the capital market investment are issued wholly or mainly to independent persons, and (d) the total value of the capital market investments made under the capital market arrangement is at least £50 million. (2) In this section— “capital market arrangement” has the same meaning as in section 72B(1) of the Insolvency Act 1986 (see paragraph 1 of Schedule 2A to that Act), “capital market investment” has the same meaning as in section 72B(1) of the Insolvency Act 1986 (see paragraphs 2 and 3 of Schedule 2A to that Act), and “independent person” means a person— who is not the disadvantaged person, and who does not have a participatory relationship with either of the affected persons. (3) In subsection (2) “the disadvantaged person”— (a) for the purposes of the application of this section in relation to section 199(6) has the meaning given by section 199(4), and (b) for the purposes of the application of this section in relation to section 201(6) has the meaning given by section 201(4). (4) For the purposes of subsection (2), a person (“A”) who is a company has a “participatory relationship” with one of the affected persons (“B”) if— (a) one of A and B is directly or indirectly participating in the management, control or capital of the other, or (b) the same person or persons is or are directly or indirectly participating in the management, control or capital of each of A and B.

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205 Provision made or imposed between ring-fence trade and other activities

(1) Subsections (2) to (4) apply if— (a) a person carries on an oil-related ring-fence trade (see section 206), and (b) any provision is made or imposed by the person as between— (i) the oil-related ring-fence trade, and (ii) any other activities carried on by the person. (2) Chapters 1 and 3 to 6 (read in accordance with Chapters 2 and 8) apply in relation to the provision as if— (a) the oil-related ring-fence trade, and the person's other activities, were carried on by two different persons, (b) the provision were made or imposed as between those two persons by means of a transaction, (c) those two persons were both controlled by the same person at the time when the provision was made or imposed, and (d) a potential advantage in relation to United Kingdom taxation were conferred by the provision on each of those two persons. (3) Subsection (2) has effect subject to subsection (4). (4) Chapters 1 and 3 to 6 apply in relation to the provision only if the effect of their applying is— (a) that a larger amount is taken for tax purposes to be the amount of the profits of the oil-related ring-fence trade for any chargeable period, or (b) that a smaller amount (including nil) is taken for tax purposes to be the amount for any chargeable period of any losses of the oil-related ring-fence trade. (5) In subsection (4)(a), the reference to a larger amount includes, if there would not otherwise have been profits, an amount of more than nil.

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206 Meaning of “oil-related ring-fence trade” in sections 205 and 218

(1) This section has effect for the interpretation of— (a) section 205, and (b) in Part 5, section 218(2)(f). (2) Activities carried on by a person are an “oil-related ring-fence trade” carried on by that person if subsection (3) or (4) applies to the activities. (3) This subsection applies to the activities if— (a) they are carried on by the person as part of a trade, and (b) in accordance with section 16(1) of ITTOIA 2005 or section 279 of CTA 2010 (oil-related activities), they are treated for any tax purposes as a separate trade distinct from all other activities carried on by the person as part of the trade. (4) This subsection applies to the activities if— (a) they are carried on by the person as a trade, and (b) in accordance with section 16(1) of ITTOIA 2005 or section 279 of CTA 2010 they would, if the person did carry on any other activities as part of the trade, be treated for any tax purposes as a separate trade distinct from all other activities carried on by the person as part of the trade.

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206A Modification of basic rule where allowances restricted for certain expenditure

(1) This section applies where— (a) in a case to which section 165A(1) of CAA 2001 (restriction of allowances for decommissioning expenditure) applies, R's available qualifying expenditure is restricted under section 165B(2) or 165C of that Act, or (b) in a case to which section 416ZC(1) of that Act (restriction of allowances for expenditure on site restoration) applies, R's qualifying expenditure is restricted under section 416ZD(2) or section 165C as applied by section 416ZD(4)(a) of that Act. (2) In calculating for tax purposes S's profits and losses in relation to the service provided by S to R, the amount which S is required to bring into account is an amount equal to R's expenditure (restricted as mentioned in subsection (1)(a) or (b)). (3) Section 147(3) and (5) do not apply to the extent that they are inconsistent with subsection (2). (4) In this section “R” and “S” have the meaning given by section 165A or 416ZC of CAA 2001 (as the case may be).

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207 Application of Part to unit trusts

(1) This Part has effect as follows. (2) As if a unit trust scheme were a company that is a body corporate. (3) As if the rights of the unit holders under a unit trust scheme were shares in the company that the scheme is deemed to be. (4) As if rights and powers of a person in the capacity of a person entitled to act for the purposes of a unit trust scheme were rights and powers of the scheme. (5) As if provision made or imposed as between— (a) a person in the capacity of a person entitled to act for the purposes of a unit trust scheme, and (b) another person, were made or imposed as between the scheme and that other person.

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208 The determinations which require the Commissioners' sanction

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209 Determinations exempt from requirement for Commissioners' sanction

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210 The requirement for the Commissioners' sanction

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211 Restriction of right to appeal against Commissioners' approval

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212 Appeals

(1) The appeals within this subsection are— (a) an appeal under section 31 of, or Schedule 1A to, TMA 1970, (b) an appeal under paragraph 34(3) of Schedule 18 to FA 1998 against an amendment of a company's return, and (c) an appeal under paragraph 48 of that Schedule against a discovery assessment or a discovery determination. (2) Subsection (3) applies so far as the question in dispute on an appeal within subsection (1)— (a) is or involves a determination of whether this Part has effect, and (b) relates to any provision made or imposed as between two persons each of whom is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities (see section 216). (3) If this subsection applies— (a) each of the persons as between whom the actual provision was made or imposed is entitled to be a party in any proceedings, (b) the tribunal is to determine the question separately from any other question in the proceedings, and (c) the tribunal's determination on the question has effect as if made in an appeal to which each of those persons was a party. (4) In subsection (1)(c)— “discovery assessment” means a discovery assessment under paragraph 41 of Schedule 18 to FA 1998 (which includes a discovery assessment under that paragraph as applied by paragraph 52 that Schedule), and “discovery determination” means a discovery determination under paragraph 41 of that Schedule.

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213 Capital allowances

(1) Nothing in this Part is to be read as affecting the calculation of the amount of any capital allowance or balancing charge made under CAA 2001. (2) Subsection (1) does not apply in relation to claims under section 174. (3) But a claim under section 174 may not be made if the claim would affect the operation of sections 165A to 165E or 416ZC to 416ZE of CAA 2001.

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214 Chargeable gains

(1) Nothing in this Part is to be read as affecting the calculation in accordance with TCGA 1992 of the amount of any chargeable gain or allowable loss. (2) Nothing in this Part requires the profits and losses of any person to be calculated for tax purposes as if, in the person's case, instead of income or losses to be brought into account in connection with the taxation of income, there were gains or losses to be brought into account in accordance with TCGA 1992. (3) Subsections (1) and (2) do not apply in relation to claims under section 174.

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215 Manner of making adjustments to give effect to Part

Any adjustments required to be made under this Part may be made by way of discharge or repayment of tax, by the modification of any assessment or otherwise.

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216 Meaning of “the relevant activities”

(1) In this Part “the relevant activities”, in relation to a person (“A”) who is one of the persons as between whom any provision is made or imposed, means activities that— (a) are within subsection (2), and (b) are not within subsection (3). (2) The activities within this subsection are those of A's activities that comprise the activities in the course of which, or with respect to which, that provision is made or imposed. (3) The activities within this subsection are any of A's activities carried on— (a) separately from the activities mentioned in subsection (2), or (b) for the purposes of a different part of A's business.

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217 Meaning of “control” and “firm”

(1) References in this Part to a person controlling a body corporate or firm are to be read in accordance with section 1124 of CTA 2010. (2) Subsection (1) has effect subject to subsection (4) and section 205(2). (3) Subsection (4) applies if— (a) the actual provision is made or imposed by or in relation to a sale of oil, (b) the oil sold is oil which has been, or is to be, extracted under rights exercisable by a company (“the producer”) which, although it may be the seller, is not the buyer, and (c) at the time of the completion of the sale or when possession of the oil passes, whichever is the earlier, at least 20% of the producer's ordinary share capital is owned directly or indirectly by one or more of the buyer and the companies (if any) that are linked to the buyer. (4) If this subsection applies, this Part has effect in relation to the actual provision as if— (a) the buyer and the seller, and (b) the producer, if it is not the seller, were all controlled by the same person at the time of the making or imposition of the actual provision. (5) For the purposes of subsection (3)(c), two companies are “linked” if— (a) one is under the control of the other, or (b) both are under the control of the same person or persons. (6) For the purposes of subsection (3)— (a) any question whether ordinary share capital is owned directly or indirectly by a company is to be decided as for Chapter 3 of Part 24 of CTA 2010, and (b) rights to extract oil are to be taken to be exercisable by a company even if they are exercisable by that company only jointly with another company or two or more other companies. (7) In this section “oil” includes any mineral oil or relative hydrocarbon oil, as well as natural gas. (8) In this Part persons carrying on a trade, profession or other business in partnership are referred to collectively as a “firm”.

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217A Introduction

(1) Where a company within the charge to corporation tax has unassessed transfer pricing profits for an accounting period, HMRC may assess those profits to corporation tax in accordance with this Part. (2) Where the conditions in section 217C(1) are met, corporation tax is charged at the UTPP rate on unassessed transfer pricing profits assessed under this Part (instead of at the main rate or any other rate). (3) The UTPP rate in relation to profits for an accounting period assessed under this Part means the sum of— (a) the underlying corporation tax rate, and (b) 6%. (4) In subsection (3) “the underlying corporation tax rate”, in relation to an amount of unassessed transfer pricing profits for an accounting period, means the sum of— (a) the rate at which corporation tax would be chargeable on those profits if the amount of those profits were added to the amount of the company’s profits for the accounting period (which may be nil) on which corporation tax would otherwise be chargeable, and (b) the percentage given by dividing the total of any amounts that would, ignoring this Part, be assessable or chargeable on the unassessed transfer pricing profits as if they were corporation tax (reduced by any reliefs that would be specific to those amounts) by the amount of the unassessed transfer pricing profits. (5) Section 217B sets out when a company has unassessed transfer pricing profits and what the amount of those profits are. (6) Chapter 2 sets out the conditions for a company to be assessed at the UTPP rate under this Part. (7) Chapter 3 sets out the process to be followed in making an assessment (including provision for a company to be assessed not at the UTPP rate). (8) Chapter 4 contains minor definitions. (9) In Schedule A1— (a) Part 1 sets out when a company has unassessed transfer pricing profits as a partner of a partnership, (b) Parts 2 and 3 set out how Chapters 2 and 3 of this Part apply in that case, and (c) Part 4 sets out how Parts 1 to 3 of the Schedule apply to a company as a corporate member of a Lloyd’s syndicate.

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217B Unassessed transfer pricing profits

(1) For the purposes of this Part, a company has unassessed transfer pricing profits for an accounting period if— (a) the company has made a self-assessment for the period, (b) provision has been made or imposed as between the company and another person (referred to in this Part as “the other party”) by means of a transaction or series of transactions, (c) the profits of the company for the period are subject to a transfer pricing requirement in relation to that provision, and (d) the transfer pricing requirement was not reflected, or is not wholly reflected, in the company’s self-assessment. (2) The unassessed transfer pricing profits of the company for the accounting period are— (a) to the extent that the transfer pricing requirement requires profits that are not reflected in the company’s self-assessment to be brought into account, those profits, and (b) to the extent that the transfer pricing requirement requires losses that are reflected in the company’s self-assessment to not be brought into account, the profits that would, if they were brought into account, produce the same result as not bringing into account those losses. (3) For the purposes of subsection (2), the references to profits or losses being brought into account are to profits or losses being brought into account in calculating the company’s profit or loss for the period for corporation tax purposes. (4) The profits of a company are subject to a transfer pricing requirement in relation to the provision if— (a) the company’s profits and losses are required to be calculated as if the arm’s length provision (within the meaning of Part 4) had been made or imposed instead of the provision, or (b) an adjustment to the company’s profits and losses that result from the provision is required by virtue of any other enactment where, but for that enactment, paragraph (a) would have applied in relation to the provision. (5) In this Part “self-assessment” means a self-assessment under paragraph 7 of Schedule 18 to FA 1998 (and where that assessment has been amended, reference to the self-assessment is to that assessment as amended). (6) This section does not apply to a company in its capacity as a corporate partner of a partnership or a corporate member of a Lloyd’s syndicate (as to which see Schedule A1) (but this does not prevent this section from otherwise applying in circumstances where a company holds an interest in another person whose profits are treated for the purposes of corporation tax as profits of the company).

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