(1) Subject to subsections (4) to (6), section 117 applies if condition A or B is met.
(2) Condition A is that—
(a) a company resident in the United Kingdom transfers to a company resident in a member State the whole or part of a business which immediately before the transfer the transferor carried on in a member State ... through a permanent establishment, and
(b) the transfer includes—
(i) the transfer of an asset or liability representing a loan relationship,
(ii) the transfer of rights and liabilities under a derivative contract, or
(iii) the transfer of intangible fixed assets that are chargeable intangible assets in relation to the transferor immediately before the transfer and in the case of one or more of which the proceeds of realisation exceed the costs recognised for tax purposes.
(3) Condition B is that—
(a) a company resident in the United Kingdom transfers part of its business to one or more companies,
(b) the part of the transferor's business which is transferred was carried on immediately before the transfer in a member State ... through a permanent establishment,
(c) at least one transferee is resident in a member State ...
(d) the transferor continues to carry on a business after the transfer,
(e) the condition in subsection (2)(b) is met, and
(f) the transfer—
(i) is made in exchange for the issue of shares in or debentures of each transferee to each person holding shares in or debentures of the transferor, or
(ii) is not so made only because, and only so far as, a transferee is prevented from so issuing such shares or debentures by section 658 of the Companies Act 2006 (general rule against limited company acquiring own shares) or by a corresponding provision of the law of a member State preventing such an issue.
(4) If a transfer that meets condition A or B includes such a transfer as is mentioned in subsection (2)(b)(i), section 117—
(a) only applies as respects the transfer so mentioned as a result of the transfer meeting condition A if the transfer is wholly or partly in exchange for shares or debentures issued by the transferee to the transferor, and
(b) only applies as respects the transfer so mentioned as a result of the transfer meeting condition B if each transferee is resident in a relevant state, but not necessarily the same one.
(5) If a transfer that meets condition A or B includes such a transfer as is mentioned in subsection (2)(b)(ii), section 117—
(a) only applies as respects the transfer so mentioned as a result of the transfer meeting condition A if the transfer is wholly or partly in exchange for shares or debentures issued by the transferee to the transferor or to the persons holding shares in or debentures of the transferor,
(b) only applies as respects the transfer so mentioned as a result of the transfer meeting condition B if each transferee is resident in a relevant state, but not necessarily the same one, and
(c) only applies as respects the transfer so mentioned if the transferor makes a claim under this section in respect of it.
(6) If a transfer that meets condition A or B includes such a transfer as is mentioned in subsection (2)(b)(iii), section 117—
(a) only applies as respects the transfer so mentioned as a result of the transfer meeting condition A if—
(i) the companies mentioned in subsection (2)(a) are companies incorporated under the law of a relevant state, and
(ii) the transfer is wholly or partly in exchange for shares or other securities issued by the transferee to the transferor,
(b) only applies as respects the transfer so mentioned as a result of the transfer meeting condition B if—
(i) the transferor and at least one of the transferees mentioned in subsection (3)(a) is a company so incorporated, and
(ii) the transfer is in exchange for shares or debentures issued by the transferee to the persons holding shares in or debentures of the transferor, and
(c) only applies as respects the transfer so mentioned if—
(i) the transfer includes the whole of the assets of the transferor used for the purposes of the business or part, or the whole of those assets other than cash, and
(ii) the transferor makes a claim under this section in respect of the transfer so mentioned.
(7) No claim may be made under subsection (6) in respect of a transfer in relation to which a claim is made under section 827 of CTA 2009 (claims to postpone charge on transfer of assets to non-UK resident company).
(7A) In this section “relevant state” means the United Kingdom or a member State.
(8) For the purposes of this section, a company is resident in a relevant state if—
(a) it is within a charge to tax under the law of the relevant state as being resident for that purpose, and
(b) it is not regarded, for the purpose of any double taxation relief arrangements to which the relevant state is a party, as resident in a territory not within a relevant state.
117 Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets
(1) If tax would have been chargeable under the law of one or more ... member States in respect of the transfer mentioned in section 116(2)(b)(i), (ii) or (iii) but for the Mergers Directive, this Part applies, and any double taxation arrangements apply, as if that tax had been chargeable.
(2) In calculating tax notionally chargeable under subsection (1), it is to be assumed—
(a) that, to the extent permitted by the law of the ... member State, losses arising on the transfer mentioned in section 116(2)(b)(i), (ii) or (iii) are set against gains arising on that transfer, and
(b) that any relief due to the transferor under that law is claimed.
(3) Subsection (1) does not apply if—
(a) the transfer of business mentioned in section 116(2)(a) or (3)(a) is not effected for genuine commercial reasons, or
(b) that transfer of business forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax.
(4) But subsection (3) does not prevent subsection (1) from applying if before the transfer—
(a) the appropriate applicant has applied to the Commissioners for Her Majesty's Revenue and Customs, and
(b) the Commissioners have notified the appropriate applicant that they are satisfied subsection (3) will not have that effect.
(5) In subsection (4) “the appropriate applicant” means—
(a) in a case where tax chargeable in respect of such a transfer as is mentioned in section 116(2)(b)(i) or (ii) is concerned, the companies mentioned in section 116(2)(a) or (3)(a), and
(b) in a case where tax chargeable in respect of such a transfer as is mentioned in section 116(2)(b)(iii) is concerned, the transferor.
(6) Sections 427 and 428 of CTA 2009 (procedure and decisions on applications for clearance) have effect in relation to subsection (4) as in relation to section 426(2) of that Act, taking the references in section 428 to section 426(2)(b) as references to subsection (4)(b) of this section.
(1) Section 119 applies if each of conditions A to E is met and—
(a) in the case of a merger within subsection (2)(a) or (b), condition F is met,
(b) in the case of a merger within subsection (2)(c), conditions F and G are met, and
(c) in the case of a merger within subsection (2)(d), condition G is met.
(2) Condition A is that—
(a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) No. 2157/2001 on the Statute for a European company (Societas Europaea),
(b) an SCE is formed by the merger of two or more co-operative societies, at least one of which is a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014 or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, in accordance with Articles 2(1) and 19 of Council Regulation (EC) No. 1435/2003 on the Statute for a European Co-operative Society (SCE),
(c) a merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or
(d) a merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures.
(3) Condition B is that each merging company is resident in a relevant state.
(4) Condition C is that the merging companies are not all resident in the same relevant state.
(5) Condition D is that in the course of the merger a company resident in the United Kingdom (“company A”) transfers to a company resident in a member State all assets and liabilities relating to a business which company A carried on in a member State ... through a permanent establishment (but see subsection (9)).
(6) Condition E is that the transfer mentioned in subsection (5) includes—
(a) the transfer of an asset or liability representing a loan relationship,
(b) the transfer of rights and liabilities under a derivative contract, or
(c) the transfer of intangible fixed assets—
(i) that are chargeable intangible assets in relation to company A immediately before the transfer, and
(ii) in the case of one or more of which the proceeds of realisation exceed the cost recognised for tax purposes.
(7) Condition F is that—
(a) the transfer of assets and liabilities to the transferee in the course of the merger is made in exchange for the issue of shares or debentures by the transferee to each person holding shares in or debentures of a transferor, or
(b) paragraph (a) is not met in relation to the transfer of those assets and liabilities only because, and only so far as, the transferee is prevented from so issuing such shares or debentures by section 658 of the Companies Act 2006 (general rule against limited company acquiring own shares) or by a corresponding provision of the law of a member State preventing such an issue.
(8) Condition G is that in the course of the merger each transferor ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986).
(9) In the case of a merger within subsection (2)(a) or (b), in determining whether section 119 applies in respect of such a transfer as is mentioned in subsection (6)(c), condition D is regarded as met even if all liabilities relating to the business which company A carried on are not transferred as mentioned in subsection (5).
(10) For the purposes of this section, a company is resident in a relevant state if—
(a) it is within a charge to tax under the law of the relevant state as being resident for that purpose, and
(b) it is not regarded, for the purpose of any double taxation relief arrangements to which the relevant state is a party, as resident in a territory not within a relevant state.
(11) In this section—
“co-operative society” means a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014, a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 or a similar society governed by the law of a member State, ...
“relevant state” means the United Kingdom or a member State,
“SE” and “SCE” have the same meaning as in CTA 2009 (see section 1319 of that Act),
“the transferee” means—
in relation to a merger within subsection (2)(a), the SE,
in relation to a merger within subsection (2)(b), the SCE, and
in relation to a merger within subsection (2)(c) or (d), the company to which assets and liabilities are transferred, and
“transferor” means—
in relation to a merger within subsection (2)(a), a company merging to form the SE,
in relation to a merger within subsection (2)(b), a co-operative society merging to form the SCE, and
in relation to a merger within subsection (2)(c) or (d), a company transferring all of its assets and liabilities.
119 Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets
(1) If tax would have been chargeable under the law of one or more ... member States in respect of the transfer mentioned in section 118(6)(a), (b) or (c) but for the Mergers Directive, this Part applies, and any double taxation arrangements apply, as if that tax had been chargeable.
(2) In calculating tax notionally chargeable under subsection (1) in respect of the transfer mentioned in section 118(6)(a) or (b), it is to be assumed—
(a) that, to the extent permitted by the law of the ... member State, losses arising on that transfer are set against gains arising on that transfer, and
(b) that any relief due to company A under that law is claimed.
(3) Subsection (1) does not apply if—
(a) the merger is not effected for genuine commercial reasons, or
(b) the merger forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax.
(4) But subsection (3) does not prevent subsection (1) from applying if before the merger—
(a) any of the merging companies has applied to the Commissioners for Her Majesty's Revenue and Customs, and
(b) the Commissioners have notified the merging companies that they are satisfied subsection (3) will not have that effect.
(5) Sections 427 and 428 of CTA 2009 (procedure and decisions on applications for clearance) have effect in relation to subsection (4) as in relation to section 426(2) of that Act, taking the references in section 428 to section 426(2)(b) as references to subsection (4)(b) of this section.
(6) In this section “company A”, “the merger” and “the merging companies” have the same meaning as in section 118.
(1) Section 121 applies if, as a result of—
(a) a relevant loan relationship transaction,
(b) a relevant derivative contracts transaction, or
(c) a relevant intangible fixed assets transaction,
tax would have been chargeable under the law of a member State ... in respect of a relevant profit but for the Mergers Directive.
(2) In this section “relevant loan relationship transaction” means—
(a) a transfer of a kind which meets condition A or B in section 421 of CTA 2009 or would meet one of those conditions if—
(i) the business or part of the business transferred were carried on by the transferor in the United Kingdom, and
(ii) the condition in section 421(3)(c) or (4)(f) of that Act were met,
and in relation to which the transferor or transferee or one of the transferees is a transparent entity, or
(b) a merger of a kind mentioned in section 431(2) of that Act which meets—
(i) conditions B to D in section 431,
(ii) in the case of a merger within section 431(3)(a), (b) or (c), condition E in section 431, and
(iii) in the case of a merger within section 431(3)(c) or (d), condition F in section 431,
and in relation to which one or more of the merging companies is a transparent entity.
(3) In this section “relevant derivative contracts transaction” means—
(a) a transfer of a kind which meets condition A or B in section 674 of CTA 2009 or would meet one of those conditions if—
(i) the business or part of the business transferred were carried on by the transferor in the United Kingdom, and
(ii) the condition in section 674(2)(c) or (3)(f) of that Act were met,
and in relation to which the transferor is a transparent entity, or
(b) a merger of a kind mentioned in section 682(2) of that Act which meets—
(i) conditions B to D in section 682,
(ii) in the case of a merger within section 682(2)(a), (b) or (c), condition E in section 682, and
(iii) in the case of a merger within section 682(2)(c) or (d), condition F in section 682,
and in relation to which one or more of the merging companies is a transparent entity.
(4) In this section “relevant intangible fixed assets transaction” means—
(a) a transfer—
(i) which is of a kind which meets condition A or B in section 819 of CTA 2009, or would meet one of those conditions if the business or part of the business transferred were carried on by the transferor in the United Kingdom, and
(ii) in relation to which the transferor or transferee or one of the transferees is a transparent entity, or
(b) a merger—
(i) which is of a kind mentioned in section 821(2) of that Act,
(ii) which meets conditions B and C in section 821,
(iii) which, if it is a merger within section 821(2)(a), (b) or (c), meets condition D in section 821,
(iv) which, if it is a merger within section 821(2)(c) or (d), meets condition E in section 821,
(v) in the course of which no qualifying assets are transferred to which section 818 of that Act (company reconstruction involving transfer of business) applies, and
(vi) in relation to which one or more of the merging companies is a transparent entity.
(5) In this section “relevant profit” means—
(a) in the case of a transfer within subsection (2)(a), a profit accruing to a transparent entity in respect of a loan relationship (or which would be treated as accruing if it were not transparent) because of the transfer of assets or liabilities representing a loan relationship by the transparent entity to the transferee,
(b) in the case of a merger within subsection (2)(b), a profit accruing to a transparent entity in respect of a loan relationship (or which would be treated as accruing if it were not transparent) because of the transfer of assets or liabilities representing a loan relationship by the transparent entity to another company in the course of the merger,
(c) in the case of a transfer within subsection (3)(a), a profit accruing to a transparent entity in respect of a derivative contract (or which would be treated as accruing if it were not transparent) because of the transfer of rights and liabilities under the derivative contract by the transparent entity to the transferee,
(d) in the case of a merger within subsection (3)(b), a profit accruing to a transparent entity in respect of a derivative contract (or which would be treated as accruing if it were not transparent) because of the transfer of rights and liabilities under the derivative contract by the transparent entity to another company in the course of the merger,
(e) in the case of a transfer within subsection (4)(a), a profit which would be treated as accruing to a transparent entity in respect of an intangible fixed asset, because of the transfer of intangible fixed assets by the transparent entity, if it were not transparent, and
(f) in the case of a merger within subsection (4)(b), a profit which would be treated as accruing to a transparent entity in respect of an intangible fixed asset, because of the transfer of intangible fixed assets by the transparent entity in the course of the merger, if it were not transparent.
(6) In this section “transparent entity” means a company which is resident in a member State ... and does not have an ordinary share capital.
121 Tax treated as chargeable in respect of relevant transactions
(1) This Part applies, and any double taxation arrangements apply, as if the tax that would have been chargeable as mentioned in section 120(1) had been chargeable.
(2) In calculating tax notionally chargeable under subsection (1), it is to be assumed—
(a) that, to the extent permitted by the law of the ... member State mentioned in section 120(1), losses arising on the relevant transfer are set against profits arising on it, and
(b) that any relief available under that law is claimed.
(3) In this section “the relevant transfer” means—
(a) the transfer of assets or liabilities mentioned in section 120(5)(a) or (b),
(b) the transfer of rights and liabilities mentioned in section 120(5)(c) or (d), or
(c) the transfer of intangible fixed assets mentioned in section 120(5)(e) or (f).
122 Tax treated as chargeable in respect of gains on transfer of non-UK business
(1) Subsection (3) applies if—
(a) section 140C or 140F of TCGA 1992 applies, and
(b) gains accruing to company A on the transfer would have been chargeable to tax under the law of the host State but for the Mergers Directive.
(2) In this section—
“company A”—
means the transferor within the meaning given by subsection (1) or (1A) of section 140C of TCGA 1992 if that subsection applies, and
has the meaning given by section 140F(2) of TCGA 1992 if it applies,
“the host State” means the member State ... mentioned, in whichever of the transfer subsections applies, as the location in which company A carries on a business or part of a business,
“the transfer” means the transfer made by company A that is mentioned in whichever of the transfer subsections applies, and
“the transfer subsections” means—
section 140C(1) of TCGA 1992 (transfer, of non-UK business or part, by UK resident “company” to one resident in another member State),
section 140C(1A) of TCGA 1992 (transfer, of part of non-UK business, by UK resident “company” to transferees including a “company” resident in another member State), and
section 140F(2) of TCGA 1992 (transfer of assets and liabilities of non-UK business, by UK resident “company” or co-operative society to one resident in another member State, as part of genuine merger of two or more “companies” or societies).
(3) This Part applies, and any double taxation arrangements apply, as if the tax mentioned in subsection (4) were tax payable under the law of the host State.
(4) That tax is the tax, calculated on the required basis, which but for the Mergers Directive would have been payable under the law of the host State in respect of the gains.
(5) For the purposes of subsection (4) “the required basis” is that—
(a) so far as permitted under the law of the host State, any losses arising on the transfer are set against any gains arising on the transfer, and
(b) any relief available to company A under the law of the host State has been duly claimed.
In sections 116 to 122 and this section—
“company” means any entity listed as a company in Part A of Annex I to the Mergers Directive,
“derivative contract” has the same meaning as in Part 7 of CTA 2009,
“intangible fixed assets” and “chargeable intangible assets”, in relation to any person, have the same meaning as in Part 8 of CTA 2009,
“loan relationship” has the same meaning as in Part 5 of CTA 2009,
“the Mergers Directive” means Council Directive 2009/133/EC,
“proceeds of realisation”, in relation to intangible fixed assets, has the meaning given in section 739 of CTA 2009, and
“recognised for tax purposes” has the same meaning as in Part 8 of CTA 2009.
124 Giving effect to solutions to cases and mutual agreements resolving cases
(1) Subsections (2) and (4) apply if under, and for the purposes of, double taxation arrangements made in relation to a territory outside the United Kingdom—
(a) a person presents, to the Commissioners for Her Majesty's Revenue and Customs or to an authority in the territory, a case concerning the person's being taxed (whether in the United Kingdom or the territory) otherwise than in accordance with the arrangements, and
(b) the Commissioners arrive at a solution to the case or make a mutual agreement with an authority in the territory for the resolution of the case.
(2) The Commissioners are to give effect to the solution or mutual agreement despite anything in any enactment, and any such adjustment as is appropriate in consequence may be made.
(3) An adjustment under subsection (2) may be made by way of discharge or repayment of tax, the allowance of credit against tax payable in the United Kingdom, the making of an assessment or otherwise.
(4) A claim for relief under any provision of—
(a) the Tax Acts,
(b) the enactments relating to capital gains tax, or
(c) the enactments relating to petroleum revenue tax,
may be made in pursuance of the solution or mutual agreement at any time before the end of the period of 12 months following the notification of the solution or mutual agreement to the person affected, even if that involves making the claim after a deadline imposed by another enactment.
(5) See section 114A of FA 2015 for provision applying this section in relation to diverted profits tax.
125 Effect of, and deadline for, presenting a case
(1) This section applies if double taxation arrangements include provision for a person to present a case—
(a) to the Commissioners for Her Majesty's Revenue and Customs, or
(b) to an officer of Revenue and Customs,
concerning the person's being taxed otherwise than in accordance with the arrangements.
(2) The presentation of any such case under and in accordance with the arrangements—
(a) does not constitute a claim for relief under the Tax Acts, the enactments relating to capital gains tax or the enactments relating to petroleum revenue tax, and
(b) is accordingly not subject to section 42 of TMA 1970 or any other enactment relating to the making of such claims.
(3) Any such case must be presented before the end of—
(a) the period of 6 years following the end of the chargeable period to which the case relates, or
(b) such longer period as may be specified in the arrangements.
In sections 127 and 128 “the Arbitration Convention” means the Convention, on the elimination of double taxation in connection with the adjustment of profits of associated enterprises, concluded on 23 July 1990 by the parties to the treaty establishing the European Economic Community (90/436/EEC).
127 Giving effect to agreements, decisions and opinions under the Convention
(1) In this section “Convention determination” means—
(a) an agreement or decision, made under the Arbitration Convention by the Commissioners for Her Majesty's Revenue and Customs (or their authorised representative) and any other competent authority, on the elimination of double taxation, or
(b) an opinion, delivered by an advisory commission set up under the Arbitration Convention, on the elimination of double taxation.
(2) Subsection (3) applies if the Arbitration Convention requires the Commissioners to give effect to a Convention determination.
(3) The Commissioners are to give effect to the Convention determination despite anything in any enactment, and any such adjustment as is appropriate in consequence may be made.
(4) An adjustment under subsection (3) may be made by way of discharge or repayment of tax, the allowance of credit against tax payable in the United Kingdom, the making of an assessment or otherwise.
(5) An enactment which imposes deadlines for the making of claims for relief under any provision of the Tax Acts does not apply to a claim made in pursuance of a Convention determination.
(1) The obligation as to secrecy imposed by any enactment does not prevent—
(a) the Commissioners for Her Majesty's Revenue and Customs, or
(b) any authorised Revenue and Customs official,
from disclosing information required to be disclosed under the Arbitration Convention in pursuance of a request made by an advisory commission set up under the Convention.
(2) In this section “Revenue and Customs official” means any person who is or was—
(a) a Commissioner for Her Majesty's Revenue and Customs,
(b) an officer of Revenue and Customs,
(c) a person acting on behalf of the Commissioners for Her Majesty's Revenue and Customs,
(d) a person acting on behalf of an officer of Revenue and Customs, or
(e) a member of a committee established by the Commissioners for Her Majesty's Revenue and Customs.
128A Power by regulations to give effect to international obligations etc
(1) The Treasury may make regulations for, or in connection with, giving effect to or enabling effect to be given to—
(a) Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union (“the Directive”);
(b) any instrument modifying or supplementing the Directive;
(c) any international agreements or arrangements that deal with—
(i) matters dealt with by the Directive,
(ii) matters that are similar to any of those dealt with by the Directive, or
(iii) any other matters that relate to or are connected with the resolution of disputes in relation to double taxation arrangements.
(2) The provision that may be made by regulations under this section includes (in particular)—
(a) provision as to the effect of any arrangements that the Commissioners for Her Majesty’s Revenue and Customs may make with authorities of territories outside the United Kingdom;
(b) provision conferring or imposing functions, rights or obligations, or authorising the conferral or imposition of functions, rights or obligations, on a person (including a commission, tribunal or court);
(c) provision under which the Commissioners or other persons may exercise discretions;
(d) provision about procedure in relation to the resolution of disputes;
(e) provision about costs, expenses and fees;
(f) provision imposing penalties or creating criminal offences;
(g) provision about appeals;
(h) provision about the form and manner in which, or time within which, things are to be done;
(i) provision supplementing section 128B.
(3) The regulations may—
(a) make provision having effect in relation to periods before the regulations come into force;
(b) make provision by reference to an instrument or document as it has effect from time to time;
(c) make provision about things done, or to be done, in territories outside the United Kingdom;
(d) make different provision for different purposes;
(e) make consequential, incidental, supplemental, transitional, transitory or saving provision;
(f) make provision amending, repealing, revoking or disapplying, or modifying the effect of, any enactment (whenever passed or made).
(4) The regulations may not create a criminal offence punishable on indictment with imprisonment for more than two years.
(5) Regulations under this section containing anything that amends or repeals a provision of primary legislation may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the House of Commons.
In this subsection “primary legislation” means—
(a) an Act,
(b) an Act of the Scottish Parliament,
(c) a Measure or Act of the National Assembly for Wales, or
(d) Northern Ireland legislation.
(6) In subsections (2) and (3) and sections 128B and 128C, a reference to a commission, tribunal, court or other person includes a reference to a commission, tribunal, court or other person in a territory outside the United Kingdom.
128B Giving effect to requirements under section 128A regulations
(1) Subsection (2) applies if anything in regulations under section 128A requires the Commissioners for Her Majesty’s Revenue and Customs to give effect to an agreement, decision or opinion made or given by—
(a) the Commissioners (or their authorised representative),
(b) the competent authority of a territory outside the United Kingdom, or
(c) any commission, tribunal, court or other person.
(2) The Commissioners are to give effect to the agreement, decision or opinion despite anything in any enactment, and any such adjustment as is appropriate in consequence may be made.
(3) An adjustment under subsection (2) may be made by way of discharge or repayment of tax, the allowance of credit against tax payable in the United Kingdom, the making of an assessment or otherwise.
128C Disclosure under international obligations etc
(1) The obligation as to secrecy imposed by any enactment does not prevent—
(a) the Commissioners for Her Majesty’s Revenue and Customs,
(b) a person who is or was an authorised Revenue and Customs official,
(c) a person who is or was a member of a committee or other body established by the Commissioners for Her Majesty’s Revenue and Customs (or jointly by the Commissioners and an authority of a territory outside the United Kingdom), or
(d) a person specified, or of a description specified, in regulations made by the Treasury,
from disclosing information required to be disclosed under a relevant instrument or agreement in pursuance of a request made by any person.
(2) In this section—
“relevant instrument or agreement” means an instrument, agreement or arrangement referred to, or of a kind referred to, in section 128A(1);
“Revenue and Customs official” means—
a Commissioner for Her Majesty’s Revenue and Customs;
an officer of Revenue and Customs;
a person acting on behalf of the Commissioners for Her Majesty’s Revenue and Customs;
a person acting on behalf of an officer of Revenue and Customs.
129 Disclosure where relief given overseas for tax paid in the United Kingdom
(1) Subsection (2) applies if the law of a territory outside the United Kingdom makes provision allowing, in respect of the payment of—
(a) income tax,
(b) corporation tax,
(c) capital gains tax, or
(d) petroleum revenue tax,
relief from tax payable under that law.
(2) The obligation as to secrecy imposed upon Revenue and Customs officials by—
(a) the Tax Acts,
(b) the enactments relating to capital gains tax, and
(c) the enactments relating to petroleum revenue tax,
does not prevent disclosure, to the authorised officer of the authorities of the territory, of such facts as may be necessary to enable the proper relief to be given under the law of the territory.
(3) The reference in subsection (1) to tax payable under the law of the territory includes only—
(a) taxes which are charged on income and which correspond to income tax,
(b) taxes which are charged on income or chargeable gains and which correspond to corporation tax,
(c) taxes which are charged on capital gains and which correspond to capital gains tax, and
(d) taxes which—
(i) are charged on amounts corresponding to amounts on which petroleum revenue tax is charged, and
(ii) correspond to petroleum revenue tax.
(4) For the purposes of subsection (3), tax may correspond to income tax, corporation tax, capital gains tax or petroleum revenue tax even though it—
(a) is payable under the law of a province, state or other part of a country, or
(b) is levied by or on behalf of a municipality or other local body.
(5) In this section “Revenue and Customs official” means any person who is or was—
(a) a Commissioner for Her Majesty's Revenue and Customs,
(b) an officer of Revenue and Customs,
(c) a person acting on behalf of the Commissioners for Her Majesty's Revenue and Customs,
(d) a person acting on behalf of an officer of Revenue and Customs, or
(e) a member of a committee established by the Commissioners for Her Majesty's Revenue and Customs.
130 Interpreting provision about UK taxation of profits of foreign enterprises
(1) Subsection (4) applies if double taxation arrangements make the provision, however expressed, mentioned in subsection (2).
(2) The provision is that the profits of an enterprise within subsection (3) are not to be subject to United Kingdom tax except so far as they are attributable to a permanent establishment of the enterprise in the United Kingdom.
(3) An enterprise is within this subsection if the enterprise—
(a) is resident outside the United Kingdom, or
(b) carries on a trade, or profession or business, the control or management of which is situated outside the United Kingdom.
(4) The provision does not prevent income of a person resident in the United Kingdom being chargeable to income tax or corporation tax.
(5) Subsection (4)—
(a) does not apply in relation to income of a person resident in the United Kingdom if section 858 of ITTOIA 2005 (UK resident partner is taxable on share of firm's income despite any double taxation arrangements) applies to the income, and
(b) does not apply in relation to income of a company resident in the United Kingdom if section 1266(2) of CTA 2009 (UK resident company that is partner in a firm is taxable on share of firm's income despite any double taxation arrangements) applies to the income.
(6) A person is resident in the United Kingdom for the purposes of this section if the person is resident in the United Kingdom for the purposes of the double taxation arrangements.
130A Interpreting provision about UK taxation of pensions etc
(1) Subsection (3) applies if double taxation arrangements make the provision, however expressed, mentioned in subsection (2).
(2) The provision is that pensions and other similar remuneration which—
(a) arise outside the United Kingdom, and
(b) are paid to persons who are resident in the United Kingdom,
are not to be subject to United Kingdom tax.
(3) That provision does not prevent a pension or other similar remuneration of a person resident in the United Kingdom being chargeable to income tax if—
(a) the pension or other similar remuneration is paid out of sums or assets that were the subject of a relevant transfer or related sums or assets, and
(b) the relevant transfer or any transaction forming part of that transfer was, or formed part of, a tax avoidance scheme.
(4) But nothing in subsection (3) prevents credit being allowed under Chapter 2 of this Part (double taxation relief by way of credit) against any tax so charged.
(5) In determining whether a pension or other similar remuneration is paid out of sums or assets within subsection (3)(a), it is to be assumed that it is paid out of such sums or assets in priority to any other sums or assets.
(6) A “relevant transfer”, in respect of any sums or assets, is a transaction or series of transactions as a result of which—
(a) the sums or assets are transferred out of a pension scheme, and
(b) the sums or assets or related sums or assets (or both) are transferred into the pension scheme under which the pension or other similar remuneration is paid.
(7) A scheme is a “tax avoidance scheme” if the main purpose, or one of the main purposes, of any party to the scheme in entering into the scheme is to secure an income tax advantage for any person under this Part by virtue of provision mentioned in subsection (2) made by double taxation arrangements.
(8) For the purposes of subsection (7)—
(a) “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions,
(b) it does not matter whether or not the double taxation arrangements were in existence at the time the tax avoidance scheme was entered into or given effect to, and
(c) “income tax advantage” is to be construed in accordance with section 572A(3) to (5) of ITA 2007.
(9) In this section—
“pension” and “other similar remuneration” have the same meaning as in the Model Tax Convention on Income and on Capital published (from time to time) by the Organisation for Economic Co-operation and Development;
“pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150 of that Act);
“related sums or assets”, in relation to other sums or assets (“the original sums or assets”), means sums or assets which arise, or (directly or indirectly) derive, from the original sums or assets or from sums or assets which so arise or derive.
131 Interpreting provision about interest influenced by special relationship
(1) Subsections (3) and (6) apply if double taxation arrangements—
(a) make provision, whether for relief or otherwise, in relation to interest (as defined in the arrangements), and
(b) contain a special relationship rule.
(2) A “special relationship rule” is provision that—
(a) applies if the amount of the interest paid is, because of a special relationship, greater than the amount (“the ordinary amount”) that would have been paid in the absence of the relationship, and
(b) has the effect that the provision mentioned in subsection (1)(a) is to apply only to the ordinary amount.
(3) The special relationship rule is to be read as requiring account to be taken of all factors, including—
(a) the question whether the loan would have been made at all in the absence of the special relationship,
(b) the amount which the loan would have been in the absence of the special relationship, and
(c) the rate of interest, and the other terms, which would have been agreed in the absence of the special relationship.
(4) Subsection (3) does not apply if the special relationship rule expressly requires regard to be had to the debt on which interest is paid in determining the excess interest (and accordingly expressly limits the factors to be taken into account).
(5) If—
(a) a company (“L”) makes a loan to another company with which it has a special relationship, and
(b) it is not part of L's business to make loans generally,
the fact that it is not part of L's business to make loans generally is to be disregarded in applying subsection (3).
(6) The special relationship rule is to be read as requiring the taxpayer—
(a) to show that there is no special relationship, or
(b) if there is a special relationship, to show the amount of interest that would have been paid in the absence of the relationship.
132 Interpreting provision about royalties influenced by special relationship
(1) Subsection (3) and section 133 apply if double taxation arrangements—
(a) make provision, whether for relief or otherwise, in relation to royalties (as defined in the arrangements), and
(b) contain a special relationship rule.
(2) A “special relationship rule” is provision that—
(a) applies if the amount of the royalties paid is, because of a special relationship, greater than the amount (“the ordinary amount”) that would have been paid in the absence of the relationship, and
(b) has the effect that the provision mentioned in subsection (1)(a) is to apply only to the ordinary amount.
(3) The special relationship rule is to be read as requiring account to be taken of all factors, including—
(a) the question whether the agreement under which the royalties are paid would have been made at all in the absence of the special relationship,
(b) the rate or amounts of royalties, and the other terms, which would have been agreed in the absence of the special relationship, and
(c) if subsection (4) applies, the factors specified in subsection (5).
(4) This subsection applies if the asset in respect of which the royalties are paid, or any asset which that asset represents or from which it is derived, has previously been in the beneficial ownership of—
(a) the person (“PR”) who is liable to pay the royalties,
(b) a person who is, or has at any time been, an associate of PR,
(c) a person who has at any time carried on a business which, at the time when the liability to pay the royalties arises, is being carried on in whole or in part by PR, or
(d) a person who is, or has at any time been, an associate of a person within paragraph (c).
(5) The factors mentioned in subsection (3)(c) are—
(a) the amounts which were paid under the transaction, or under each of the transactions in a series of transactions, as a result of which the asset has come to be an asset of the beneficial owner for the time being,
(b) the amounts which would have been paid under that transaction, or under each of those transactions, in the absence of a special relationship, and
(c) the question whether the transaction, or series of transactions, would have taken place in the absence of a special relationship.
(6) Subsection (3) does not apply if the special relationship rule expressly requires regard to be had to the use, right or information for which royalties are paid in determining the excess royalties (and accordingly expressly limits the factors to be taken into account).
(7) For the purposes of this section, a person (“A”) is an associate of another person (“B”) at a given time if—
(a) A was directly or indirectly participating in the management, control or capital of B at that time, or
(b) the same person was, or the same persons were, directly or indirectly participating in the management, control or capital of A and B at that time.
(8) For the interpretation of subsection (7), see sections 157(1), 158(4), 159(1) and 160(1) (which have the effect that references in subsection (7) to direct or indirect participation are to be read in accordance with provisions of Chapter 2 of Part 4).
133 Special relationship rule for royalties: matters to be shown by taxpayer
(1) If this section applies (as to which, see section 132(1)), the special relationship rule is to be read as requiring the taxpayer to show—
(a) the absence of any special relationship, or
(b) as the case may be, the rate or amounts of royalties that would have been payable in the absence of the special relationship.
(2) The requirement under subsection (1)(a) includes whichever is applicable of the following requirements.
(3) The first of those requirements is—
(a) to show that no person of any of the descriptions in section 132(4)(a) to (d) has previously been the beneficial owner of the asset in respect of which the royalties are paid, and
(b) to show that no person of any of those descriptions has previously been the beneficial owner of any asset which that asset represents or from which it is derived.
(4) The second of those requirements is—
(a) to show that the transaction, or series of transactions, mentioned in section 132(5)(a) would have taken place in the absence of a special relationship, and
(b) to show the amounts which would have been paid under the transaction, or under each of the transactions in the series of transactions, in the absence of a special relationship.
134 Correcting assessments where relief is available
(1) Subsections (5) and (6) apply if—
(a) under double taxation arrangements, relief may be given in the United Kingdom, or in the territory in relation to which the arrangements are made, in respect of any income or any chargeable gain, and
(b) condition A or B is met.
(2) Subsections (5) and (6) also apply if—
(a) under unilateral relief arrangements for a territory outside the United Kingdom, relief may be given in respect of any income or any chargeable gain, and
(b) condition A or B is met.
(3) Condition A is that it appears that the assessment—
(a) to income tax or corporation tax made in respect of the income, or
(b) to corporation tax or capital gains tax made in respect of the gain,
is not made in respect of the full amount of the income or gain.
(4) Condition B is that it appears that the assessment—
(a) to income tax or corporation tax made in respect of the income, or
(b) to corporation tax or capital gains tax made in respect of the gain,
is incorrect having regard to the credit, if any, to be given under the arrangements.
(5) Assessments may be made that are necessary to ensure—
(a) that the full amount of the income or gain is assessed, and
(b) that the proper credit, if any, is given.
(6) If the income is entrusted to any person in the United Kingdom for payment, an assessment under subsection (5) may be made on the recipient of the income.
(7) An officer of Revenue and Customs may make amendments—
(a) of assessments or determinations, or
(b) of decisions on claims,
that are necessary in consequence of Chapter 1 so far as it applies for petroleum revenue tax purposes.
(1) This Part (except sections 144 and 145) applies for the purpose of giving relief from double taxation in respect of special withholding tax.
(2) Relief under this Part—
(a) is given by set-off against income tax or capital gains tax, and
(b) so far as it cannot be given by set-off against income tax or capital gains tax, is given by repayment.
(1) Subsections (2) to (7) have effect for the purposes of this Part.
(2) “Double taxation arrangements” means arrangements that have effect under section 2(1) (double taxation relief by agreement with territories outside the United Kingdom).
(3) “International arrangements”, in relation to a territory, means arrangements made in relation to that territory with a view to ensuring the effective taxation of savings income—
(a) under the law of the United Kingdom, or
(b) under that law and the law of the territory.
(4) “The Savings Directive” means Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments.
(5) “Savings income”—
(a) in the case of special withholding tax levied under the law of a member State, has the same meaning as the expression “interest payment” has for the purposes of the Savings Directive (see Articles 6 and 15 of the Directive), and
(b) in the case of special withholding tax levied under the law of a territory other than a member State, has the same meaning as the corresponding expression has for the purposes of the international arrangements concerned.
(6) “Special withholding tax” means a withholding tax (however described) levied under the law of a territory outside the United Kingdom implementing—
(a) in the case of a member State, Article 11 of the Savings Directive (withholding tax to be levied in Belgium, Luxembourg and Austria for the period described in the Directive), or
(b) in the case of a territory other than a member State, any corresponding provision of international arrangements (whatever the period for which the provision is to have effect).
(7) In the application of this Part in relation to capital gains tax, expressions used in this Part and in TCGA 1992 have the same meaning in this Part as in TCGA 1992.
137 Income tax credit etc for special withholding tax
(1) Subsection (5) applies if each of conditions A to C is met.
(2) Condition A is that a person—
(a) is liable to income tax for a tax year in respect of a payment of savings income, or
(b) would be liable to income tax for a tax year in respect of a payment of savings income but for any exemption or relief.
(3) Condition B is that special withholding tax is levied in respect of the payment.
(4) Condition C is that the person is UK resident for the tax year.
(5) On the making of a claim, income tax (“the deemed tax”) is to be treated as having been—
(a) paid by or on behalf of the person for the tax year, and
(b) deducted at source for the tax year for the purposes of the provisions listed in subsection (7).
(6) The amount of the deemed tax is given by section 138.
(7) The provisions mentioned in subsection (5)(b) are—
section 7 of TMA 1970 (notice of liability to income tax and capital gains tax),
section 8 of TMA 1970 (personal return),
section 8A of TMA 1970 (trustee's return),
section 9 of TMA 1970 (returns to include self-assessment),
section 59A of TMA 1970 (payments on account of income tax),
section 59B of TMA 1970 (payments of income tax and capital gains tax), and
section 824(3) of ICTA (repayment supplements: determination of relevant time).
138 Amount and application of the deemed tax under section 137
(1) For the purposes of section 137, the amount of the deemed tax is—
(a) the amount of the special withholding tax levied (see section 137(3)), less
(b) any amounts of that tax that are within subsection (2).
(2) An amount of special withholding tax levied is within this subsection if—
(a) the person has obtained relief from double taxation in respect of that special withholding tax under the law of a territory outside the United Kingdom, and
(b) the person was resident in that territory, or was under any double taxation arrangements treated as being resident in that territory, in the tax year mentioned in section 137(2).
(3) Subsection (4) applies if the amount of the deemed tax exceeds the amount (which may be nil) of income tax for which the person is liable for that tax year (before any set-off for the deemed tax).
(4) So far as it would not otherwise be the case—
(a) the excess is to be set against any capital gains tax for which the person is liable for that tax year, and
(b) the person is entitled to a repayment of income tax in respect of any remaining balance of the excess.
139 Capital gains tax credit etc for special withholding tax
(1) Subsection (6) applies if each of conditions A to D is met.
(2) Condition A is that a person makes a disposal of assets in a tax year.
(3) Condition B is that if a chargeable gain were to accrue on the disposal—
(a) the gain would accrue to the person, and
(b) the person would be chargeable to capital gains tax in respect of the gain.
(4) Condition C is that—
(a) the consideration for the disposal consists of, or includes, an amount of savings income, and
(b) special withholding tax is levied in respect of the whole, or any part, of the consideration.
(5) Condition D is that the person is resident in the United Kingdom for the tax year.
(6) On the making of a claim, capital gains tax (“the deemed tax”) is to be—
(a) treated as having been paid by or on behalf of the person for the tax year, and
(b) treated for the purposes of section 283(2) of TCGA 1992 (repayment supplements: determination of relevant time) as having been paid on the 31 January following the tax year.
(7) The amount of the deemed tax is given by section 140.
(8) For the purposes of subsection (3)(b), disregard—
(a) any deductions that are to be made from the total amount referred to in section 2(2) of TCGA 1992 (deductions for allowable losses), and
(b) section 3 of TCGA 1992 (annual exempt amount).
140 Provisions about the deemed tax under section 139
(1) For the purposes of section 139, the amount of the deemed tax is—
(a) the amount of the special withholding tax levied (see section 139(4)(b)), less
(b) any amounts of that tax that are within subsection (2) or (3).
(2) An amount of special withholding tax levied is within this subsection if—
(a) the person has obtained relief from double taxation in respect of that special withholding tax under the law of a territory outside the United Kingdom, and
(b) the person was resident in that territory, or was under any double taxation arrangements treated as being resident in that territory, in the tax year mentioned in section 139(2).
(3) An amount of special withholding tax levied is within this subsection if by reference to that amount of that tax—
(a) there is that amount of deemed tax under section 137(5), or
(b) there would be that amount of deemed tax under section 137(5) on the making of a claim.
(4) Subsection (5) applies if the amount of the deemed tax exceeds the amount (which may be nil) of capital gains tax for which the person is liable for that tax year (before any set-off for the deemed tax).
(5) So far as it would not otherwise be the case—
(a) the excess is to be set against any income tax for which the person is liable for that tax year, and
(b) the person is entitled to a repayment of capital gains tax in respect of any remaining balance of the excess.
(6) For the purposes of the provisions listed in subsection (7) in relation to the person for that tax year, references in those provisions to income tax deducted at source for that tax year include the deemed tax.
(7) Those provisions are—
section 7 of TMA 1970 (notice of liability to income tax and capital gains tax),
section 8 of TMA 1970 (personal return),
section 8A of TMA 1970 (trustee's return),
section 9 of TMA 1970 (returns to include self-assessment), and
section 59B of TMA 1970 (payments of income tax and capital gains tax).
141 Credit under Chapter 2 of Part 2 to be allowed first
(1) Any credit for foreign tax allowed under Chapter 2 of Part 2 against income tax or capital gains tax is to be allowed before effect is given to sections 137 to 140.
(2) In this section “foreign tax” has the same meaning as in that Chapter (see section 21).
(1) This section applies for the purposes of section 143.
(2) Condition A is that—
(a) a person is liable to income tax in respect of a payment of savings income, or
(b) a chargeable gain accrues to a person on a disposal by the person of assets in circumstances where the consideration for the disposal consists of, or includes, an amount of savings income.
(3) Condition B is that special withholding tax is levied in respect of—
(a) the payment of savings income, or
(b) the whole or any part of the consideration for the disposal.
(4) Condition C is that a claim under this Part has been made in respect of the special withholding tax.
(5) Condition D is that no credit for foreign tax in respect of the savings income or chargeable gain concerned is allowed under Chapter 2 of Part 2 (so that sections 31(2) and 32(2), which make provision similar to section 143, do not apply).
143 Taking account of special withholding tax in calculating income or gains
(1) Subsection (2) applies if—
(a) each of conditions A to D of section 142 is met, and
(b) income tax is payable by reference to the amount of the savings income received in the United Kingdom.
(2) For income tax purposes, the amount received is increased by the amount of special withholding tax—
(a) levied in respect of it, and
(b) in respect of which a claim under this Part has been made.
(3) Subsection (4) applies if—
(a) each of conditions A to D of section 142 is met, and
(b) capital gains tax is payable by reference to the amount of the chargeable gain received in the United Kingdom.
(4) For capital gains tax purposes, the amount received is increased by the amount given by—
S
W
T
×
G
U
K
G
–
S
W
T
where—
SWT is the amount of special withholding tax—
levied in respect of the whole or the part of the consideration for the disposal, and
in respect of which a claim has been made under this Part,
GUK is the amount of the chargeable gain received in the United Kingdom, and
G is the amount of the chargeable gain accruing to the person on the disposal.
(5) Subsection (6) applies if—
(a) each of conditions A to D of section 142 is met, and
(b) neither subsection (2) nor subsection (4) applies.
(6) In calculating—
(a) the amount of the income for income tax purposes, or
(b) the amount of any chargeable gain for capital gains tax purposes,
no deduction is to be made for special withholding tax in respect of which a claim has been made under this Part (whether special withholding tax in respect of the same, or any other, income or in respect of the same, or any other, chargeable gains).
(1) This section enables officers of Revenue and Customs to issue certificates to be used under the law of a territory outside the United Kingdom implementing—
(a) in the case of a member State, Article 13(1)(b) of the Savings Directive (procedure to avoid levy of special withholding tax where beneficial owner presents to the paying agent a certificate drawn up by a competent authority in the beneficial owner's member State of residence for tax purposes), or
(b) in the case of a territory other than a member State, any corresponding provision of international arrangements (whatever the period for which the provision is to have effect).
(2) If, on the written application of a person, an officer is satisfied that the applicant has provided an officer with—
(a) the required information, and
(b) the documents (if any) required by an officer to verify that information,
an officer must issue a certificate to the applicant.
(3) In subsection (2) “the required information” means—
(a) the applicant's name and address,
(b) the applicant's National Insurance number or, if the applicant does not have one, the applicant's date, town and country of birth,
(c) the number of the account which is to, or may, give rise to payments of savings income to or for the applicant or, if there is no such number, a statement identifying the debt, instrument or arrangement which is to, or may, give rise to payments of savings income,
(d) the name and address of the paying agent who is to make the payments of savings income to, or to secure the payments of savings income for, the applicant, and
(e) the period, not exceeding 3 years, for which the applicant would like the certificate to be valid.
(4) A certificate under this section must be in writing and must state—
(a) the information mentioned in subsection (3)(a) to (d), and
(b) the period of validity of the certificate (which must not exceed 3 years).
(5) A certificate under this section must be issued no later than the end of the period of 2 months beginning with the date on which the applicant provides the information and documents required by or under subsection (2).
(6) If the requirements of—
(a) Article 13(2) of the Savings Directive (requirements in relation to issue of certificates for purposes of Article 13(1)(b) procedure), and
(b) any corresponding provision of any international arrangements,
differ to any extent, subsections (3) to (5) have effect, in their application in relation to the international arrangements, with such modifications as may be required because of those arrangements.
145 Refusal to issue certificate and appeal against refusal
(1) This section applies if, on an application for a certificate under section 144, an officer of Revenue and Customs (“the decision officer”) is not satisfied that the applicant has provided an officer with the information and documents required by or under section 144(2).
(2) An officer must give written notice (“the refusal notice”) to the applicant of the decision officer's refusal to issue a certificate.
(3) The refusal notice must specify the reasons for the refusal.
(4) The applicant may by written notice (“the appeal notice”) appeal against the refusal.
(5) The appeal notice must be given to an officer within 30 days of the date of the refusal notice.
(6) Part 5 of TMA 1970 (appeals and other proceedings) is to apply in relation to an appeal under this section.
(7) On an appeal that is notified to the tribunal, the tribunal may—
(a) confirm the refusal notice, or
(b) quash it and require an officer to issue a certificate.
(8) In this section “the tribunal” means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.
147 Tax calculations to be based on arm's length, not actual, provision
(1) For the purposes of this section “the basic pre-condition” is that—
(a) provision (“the actual provision”) has been made or imposed as between any two persons (“the affected persons”) by means of a transaction or series of transactions,
(b) the participation condition is met (see section 148),
(c) the actual provision is not within subsection (7) (oil transactions), and
(d) the actual provision differs from the provision (“the arm's length provision”) which would have been made as between independent enterprises.
(2) Subsection (3) applies if—
(a) the basic pre-condition is met, and
(b) the actual provision confers a potential advantage in relation to United Kingdom taxation on one of the affected persons.
(3) The profits and losses of the potentially advantaged person are to be calculated for tax purposes as if the arm's length provision had been made or imposed instead of the actual provision.
(4) Subsection (5) applies if—
(a) the basic pre-condition is met, and
(b) the actual provision confers a potential advantage in relation to United Kingdom taxation (whether or not the same advantage) on each of the affected persons.
(5) The profits and losses of each of the affected persons are to be calculated for tax purposes as if the arm's length provision had been made or imposed instead of the actual provision.
(6) Subsections (3) and (5) have effect subject to—
(a) section 165 (exemption for dormant companies),
(b) section 166 (exemption for small and medium-sized enterprises),
(bza) section 173A,
(ba) section 206A (modification of basic rule where allowances restricted for certain oil-related expenditure),
(c) section 213 (this Part generally does not affect calculation of capital allowances),
(d) section 214 (this Part generally does not affect calculation of chargeable gains),
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g) section 938N of CTA 2010 (this Part treated as of no effect for the purposes of Part 21B of CTA 2010 (group mismatch schemes)).
(7) The actual provision is within this subsection if it is made or imposed by means of any transaction or deemed transaction in the case of which the price or consideration is determined in accordance with any of sections 225F to 225J of ITTOIA 2005 or any of sections 281 to 285 of CTA 2010 (transactions and deemed transactions involving oil treated as made at market value).
(1) For the purposes of section 147(1)(b), the participation condition is met if—
(a) condition A is met in relation to the actual provision so far as the actual provision is provision relating to financing arrangements, and
(b) condition B is met in relation to the actual provision so far as the actual provision is not provision relating to financing arrangements.
(2) Condition A is that, at the time of the making or imposition of the actual provision or within the period of six months beginning with the day on which the actual provision was made or imposed—
(a) one of the affected persons was directly or indirectly participating in the management, control or capital of the other, or
(b) the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons.
(3) Condition B is that, at the time of the making or imposition of the actual provision—
(a) one of the affected persons was directly or indirectly participating in the management, control or capital of the other, or
(b) the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons.
(4) In this section “financing arrangements” means arrangements made for providing or guaranteeing, or otherwise in connection with, any debt, capital or other form of finance.
(5) For the interpretation of subsections (2) and (3) see sections 157 to 163.
148A Participation condition treated as met: transfer pricing notice
(1) Subsection (3) applies where—
(a) the basic pre-condition would be met, if the participation condition in section 148 were met,
(b) as a result of the application of sections 157 to 161, the participation condition is not met, and
(c) either (ignoring those sections, which give particular meanings to the following words for the purposes of section 148)—
(i) one of the affected persons was, at the time of the making or imposition of the actual provision, directly or indirectly participating in the management, control or capital of the other, or
(ii) the same person or persons was or were, at that time, directly or indirectly participating in the management, control or capital of each of the affected persons.
(2) Whether a person was directly or indirectly participating in the management, control or capital of another person is, for the purposes of subsection (1)(c), to be determined having regard to all of the circumstances.
(3) The Commissioners for His Majesty's Revenue and Customs may give the potentially advantaged person a notice under this section.
(4) The effect of the notice is that the participation condition is to be treated as met for the purposes of applying this Part in relation to the chargeable period in which it is given and subsequent chargeable periods.
(5) Where the Commissioners consider that a particular case is analogous to a case that would meet the participation condition only as a result of section 161 (actual provision relates, to any extent, to financing arrangements)—
(a) the Commissioners must state that in the notice, and
(b) subsections (1)(d), (2)(b), (3), (4)(b) and (5) of section 147 have effect in relation to that case as if reference to “the actual provision” were to the actual provision so far as relating to the financing arrangements concerned.
(6) A notice under subsection (3) is referred to in Chapter 3 as a transfer pricing notice.
(7) Sections 169 to 171 in that Chapter make general provision about the giving of, and effect of, transfer pricing notices.
(8) But neither section 169(3) (no transfer pricing notice before notice of enquiry given) nor section 171 (tax returns where transfer pricing notice given) applies to a transfer pricing notice under this section.
(1) In this Part—
“the actual provision”, and
“the affected persons”,
have the meaning given by section 147(1).
(2) Subsection (1) does not apply if Chapters 1 and 3 to 6 apply in accordance with section 205(2) to (4) (oil-related ring-fence trades) but, in that event, in this Part—
“the actual provision” means the provision mentioned in section 205(1)(b), and
“the affected persons” means the two persons mentioned in section 205(2).
(3) Subsections (1) and (2) are subject to subsection (4).
(4) If the participation condition (see section 148) would not be met but for section 161 or 162 (cases in which actual provision relates, to any extent, to financing arrangements), then in section 147(1)(d), (2)(b), (3), (4)(b) and (5) “the actual provision” is a reference to the actual provision so far as relating to the financing arrangements concerned.
(1) In this Part “transaction” includes arrangements, understandings and mutual practices (whether or not they are, or are intended to be, legally enforceable).
(2) References in this Part to a series of transactions include references to a number of transactions each entered into (whether or not one after the other) in pursuance of, or in relation to, the same arrangement.
(3) A series of transactions is not prevented by reason only of one or more of the matters mentioned in subsection (4) from being regarded for the purposes of this Part as a series of transactions by means of which provision has been made or imposed as between any two persons.
(4) Those matters are—
(a) that there is no transaction in the series to which both those persons are parties,
(b) that the parties to any arrangement in pursuance of which the transactions in the series are entered into do not include one or both of those persons, and
(c) that there is one or more transactions in the series to which neither of those persons is a party.
(5) In this section “arrangement” means any scheme or arrangement of any kind (whether or not it is, or is intended to be, legally enforceable).