Legalize / United Kingdom / Public General Act

Taxation (International and Other Provisions) Act 2010

Type Public General Act

Publication 2010-03-18

Last updated 2026-09-11

State In force

Department Statute Law Database

Source legislation.gov.uk

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articles Not indexed

An Act to restate, with minor changes, certain enactments relating to tax; to make provision for purposes connected with the restatement of enactments by other tax law rewrite Acts; and for connected purposes.

Reform history JSON API

(d) the financial instrument gives rise to regulation 7 fair value profits or losses within the meaning of regulation 7 of those regulations, or

(e) the financial instrument is wholly denominated in the reference currency used by the company in relation to the actual provision, or the part of the actual provision, to which the financial instrument relates.

(4) A financial instrument of a company is matched with another financial instrument of the company to the extent that one is intended by the company to act to eliminate or substantially reduce the currency risk of the other.

(5) A financial instrument of a company forms part of a currency tax offset arrangement to the extent that—

(a) the company (“the first company”) has an exchange gain or loss arising in relation to the instrument and that would (ignoring this Part) be brought into account,

(b) that gain or loss is offset by a corresponding exchange loss or gain arising to another company in relation to that financial instrument or another financial instrument and that would (ignoring this Part) be brought into account by that other company, and

(c) the companies intended that the gain or loss referred to in paragraph (a) would be offset by the loss or gain referred to in paragraph (b).

(6) In this section—

“currency risk” means a risk which can be attributed to fluctuations in exchange rates between currencies over a period of time;

“financial instrument” means—a loan relationship, ora derivative contract;

“reference currency”, in relation to a company and actual provision or part of actual provision, means the currency by reference to which the profits of the company, so far as they relate to the provision or part, are calculated for corporation tax purposes.

CHAPTER 4 — Position, if only one affected person potentially advantaged, of other affected person

Claim by affected person who is not advantaged

Claim by the affected person who is not potentially advantaged etc

174

(1) Subsection (2) applies if—

(a) only one of the affected persons (in this Chapter called “the advantaged person”) is a person on whom a potential advantage in relation to United Kingdom taxation is conferred by the actual provision, and

(b) the other affected person (in this Chapter called “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).

(1A) Subsection (2) also applies in any case where—

(a) one of the affected persons is a non-UK resident company with a permanent establishment in the United Kingdom,

(b) the taxable profits of that company are calculated, as a result of section 21 of CTA 2009, as if the arm’s length provision (to some extent) had been made or imposed between the permanent establishment and the other affected person, and

(c) if the actual provision (to the extent corresponding to the arm’s length provision treated as made or imposed between the permanent establishment and the other person) had been made or imposed between the permanent establishment and the other person, that provision—

(i) would confer a potential advantage on the non-UK resident company in relation to United Kingdom taxation, and

(ii) would not confer a potential advantage on the other person in relation to United Kingdom taxation.

(1B) For the purposes of applying that subsection in such a case—

(a) the permanent establishment is to be regarded as “the advantaged person”,

(b) the other affected person is to be regarded as the “disadvantaged person”,

(c) the reference to the arm’s length provision is to that provision to the extent it is treated as having been made or imposed between the permanent establishment and the other affected person for the purpose of calculating the profits of the non-UK resident company, and

(d) the reference to the actual provision is to that provision to the extent that it as corresponds to the arm’s length provision treated as having been made or imposed between the permanent establishment and the other affected person for that purpose.

(2) On the making of a claim by the disadvantaged person—

(a) the profits and losses of the disadvantaged 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, and

(b) despite any limit in the Tax Acts on the time within which any adjustment may be made, all such adjustments are to be made in the disadvantaged person's case as may be required to give effect to the assumption that the arm's length provision was made or imposed instead of the actual provision.

(3) Provision about claims under this section is made by—

section 174A (claim not allowed in some cases where the disadvantaged person is within the charge to income tax),

section 175 (application of section 174 where guarantee disallowed),

section 176 (claim cannot be made unless advantaged person has made return on the basis that the arm's length provision applies),

section 177 (when claim may be made or amended), and

sections 181 to 184 (option to make claims in accordance with section 182 in some cases where actual provision relates to a security issued by one of the affected persons).

(4) Subsection (2) has effect subject to—

section 180 (closing trading stock and closing work in progress in a trade),

sections 188 and 189 (effect of claims under this section on double taxation relief), and

Chapter 5 (provision, where liabilities of an affected person under securities issued by that person are guaranteed, for attribution to guarantor of things done by that affected person),

Claims under section 174 where disadvantaged person within charge to income tax

174A

A claim under section 174 may not be made if—

(a) the disadvantaged person is a person (other than a company) within the charge to income tax in respect of profits arising from the relevant activities, and

(b) the advantaged person is a company.

Application of section 174 where guarantee disallowed

175

(1) Subsection (2) applies where—

(a) the actual provision includes provision for the borrowing of an amount,

(b) that amount would not have been lent between independent enterprises but for a guarantee,

(d) the participation condition, in relation to the actual provision for the borrowing—

(i) would not be satisfied but for section 161 (indirect participation), or

(ii) is satisfied as a result of a notice given under section 148A(3), and the Commissioners for His Majesty's Revenue and Customs consider that the case is analogous to a case that would meet the participation condition only as a result of section 161.

(2) For the purposes of section 174(2), the amount is to be treated as if it had been lent to the guarantor on equivalent terms to the terms on which it was lent to the borrower.

(3) Section 154 (interpretation of section 153A and 153B) applies for the purposes of this section as it applies for the purposes of sections 153A and 153B.

Claims under section 174: advantaged person must have made return

176

(1) A claim may not be made under section 174 unless a calculation has been made in the case of the advantaged person on the basis that the arm's length provision was made or imposed instead of the actual provision.

(2) A claim made under section 174 must be consistent with the calculation made on that basis in the case of the advantaged person.

(3) For the purposes of subsections (1) and (2), a calculation is to be taken to have been made in the case of the advantaged person on the basis that the arm's length provision was made or imposed instead of the actual provision if (and only if)—

(a) the calculations made for the purposes of any return by the advantaged person have been made on that basis because of this Part or Chapter 4 of Part 2 of CTA 2009, or

(b) a relevant notice (see section 190) given to the advantaged person takes account of a determination in pursuance of this Part of an amount to be brought into account for tax purposes on that basis.

Time for making, or amending, claim under section 174

177

(1) A claim under section 174 can be made only in the period mentioned in subsection (2) or (3).

(2) If a return has been made by the advantaged person on the basis mentioned in section 176(1), the period is the two years beginning with the day of the making of the return.

(3) If a relevant notice (see section 190) taking account of such a determination as is mentioned in section 176(3)(b) has been given to the advantaged person, the period is the two years beginning with the day on which that notice was given.

(4) Subsection (5) applies if—

(a) a claim under section 174 is made in relation to a return made on the basis mentioned in section 176(1), and

(b) a relevant notice taking account of such a determination as is mentioned in section 176(3)(b) is subsequently given to the advantaged person.

(5) The disadvantaged person is entitled, within the period mentioned in subsection (3), to make any such amendment of the claim as may be appropriate in consequence of the determination contained in the relevant notice.

(6) Subsections (1) and (5) have effect subject to section 186(3) (which provides for the extension of the period for making or amending a claim).

Meaning of “return” in sections 176 and 177

178

(1) In sections 176 and 177 “return” means—

(a) any return required to be made under TMA 1970 or under Schedule 18 to FA 1998 for income tax or corporation tax purposes, or

(b) any voluntary amendment of a return within paragraph (a).

(2) In subsection (1)(b) “voluntary amendment” means—

(a) an amendment under section 9ZA or 12ABA of TMA 1970 (amendment of personal, trustee or partnership return by taxpayer), or

(b) an amendment under Schedule 18 to FA 1998 other than one made in response to the giving of a relevant notice (see section 190).

Claims: special cases

Compensating payment if advantaged person is controlled foreign company

179

(1) Subsection (2) applies if—

(a) the actual provision is provision made or imposed in relation to a CFC,

(b) for the purpose of determining the CFC's assumed taxable total profits for an accounting period, the CFC's profits and losses are to be calculated in accordance with section 147(3) or (5) in the case of that provision,

(d) in consequence of the application of section 147(3) or (5) as mentioned in paragraph (b), the total of those sums is more than it would otherwise be.

(2) Sections 174 to 178 have effect as if the CFC were a person on whom a potential advantage in relation to United Kingdom taxation were conferred by the actual provision.

(3) In applying sections 174 to 178 in a case in which they apply because of subsection (2)—

(a) references to the advantaged person in sections 176(3)(a) and (b) and 177(2), (3) and (4)(b) include a reference to any of the chargeable companies on which a sum is charged, and

(b) references to corporation tax include a reference to the CFC charge.

(4) In this section terms which are defined in Part 9A have the same meaning as they have in that Part.

(5) For the purposes of subsections (1)(c) and (d) and (3)(a) assume that any claims made under Chapter 9 of Part 9A for the accounting period were not made.

Application of section 174(2)(a) in relation to transfers of trading stock etc

180

(1) Section 174(2)(a) does not affect the credits to be brought into account by the disadvantaged person in respect of—

(a) closing trading stock, or

(b) closing work in progress in a trade,

for accounting periods ending on or after the day given by subsection (2).

(2) That day is the last day of the accounting period of the advantaged person in which the actual provision was made or imposed.

(3) For the purposes of this section “trading stock”, in relation to any trade, has the meaning given by—

(a) section 174 of ITTOIA 2005, or

(b) section 163 of CTA 2009.

Alternative way of claiming if borrowing is involved

Section 182 applies to claims where actual provision relates to borrowing

181

(1) Subsection (2) applies if—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the actual provision is provision in relation to borrowing.

(2) A claim under section 174 may be made in accordance with section 182.

(3) For the purposes of this Part, a “section 182 claim” is a claim under section 174 made in accordance with section 182.

(4) For the purposes of this section “borrowing” has the meaning it has in sections 153A and 153B (see section 154).

Making of section 182 claims

182

(1) A section 182 claim may be made by—

(a) the disadvantaged person, or

(b) the advantaged person.

(2) A section 182 claim made by the advantaged person is to be taken to be made on behalf of the disadvantaged person.

(3) A section 182 claim may be made before or after a calculation within section 176(1) has been made.

(4) A section 182 claim must be made either—

(a) at any time before the end of the period mentioned in section 177(2), or

(b) 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 a claim).

Giving effect to section 182 claims

183

(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

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.

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

184

(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).

Notification to persons who may be disadvantaged

Notice to potential claimants

185

(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), orany advance-pricing-agreement assumptions (see section 222(6)).

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

186

(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.

Treatment of interest where claim made

Tax treatment if actual interest exceeds arm's length interest

187

(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

Treatment of interest where claim prevented by section 174A

Excess interest treated as a ... distribution

187A

(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).

Adjustment of double taxation relief where claim made

Double taxation relief by way of credit for foreign tax

188

(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, orany 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.

Double taxation relief by way of deduction for foreign tax

189

(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.

Interpretation of Chapter

Meaning of “relevant notice”

190

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,

(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.

CHAPTER 5 — Position of guarantor of affected person's borrowing liabilities

When sections 192 to 194 apply

191

(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

Attribution to guarantor company of things done by borrower

192

(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

(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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision for cases within Part 6A

192A

(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),

(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.

Interaction between claims under sections 174 and 192(1)

193

(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.

Claims under section 192(1): general provisions

194

(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

(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.

CHAPTER 6 — Balancing payments

Qualifying conditions for purposes of section 196

195

(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.

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

196

(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”.

Qualifying conditions for purposes of section 198

197

(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).

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

198

(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

Pre-conditions for making election under section 200

199

(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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Election to pay tax rather than make balancing payments

200

(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”.

Pre-conditions for making election under section 202

201

(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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

202

(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”.

Elections under section 200 or 202

203

(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, andin 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.

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

204

(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,

(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, andwho 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.

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

205

(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,

(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.

206

(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.

Modification of basic rule where allowances restricted for certain expenditure

206A

(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).

CHAPTER 8 — Supplementary provisions and interpretation of Part

Unit trusts

Application of Part to unit trusts

207

(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.

...

The determinations which require the Commissioners' sanction

208

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determinations exempt from requirement for Commissioners' sanction

209

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The requirement for the Commissioners' sanction

210

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restriction of right to appeal against Commissioners' approval

211

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appeals

212

(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

(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.

Effect of Part on capital allowances and chargeable gains

Capital allowances

213

(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.

Chargeable gains

214

(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.

Adjustments

Manner of making adjustments to give effect to Part

215

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.

Definitions

Meaning of “the relevant activities”

216

(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.

Meaning of “control” and “firm”

217

(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”.

Part 4A — Assessment of unassessed transfer pricing profits

Chapter 1 — Unassessed transfer pricing profits

Introduction

217A

(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

Unassessed transfer pricing profits

217B

(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).

Chapter 2 — Conditions for being assessed

Conditions for being assessed under this Part at the UTPP rate

217C

(1) Unassessed transfer pricing profits of a company may be assessed under this Part at the UTPP rate only to the extent that—

(a) the provision to which the profits relate has an effective tax mismatch outcome for the accounting period to which the profits relate,

(b) the tax design condition is met, and

(2) In this section “excepted loan relationship arrangements” means—

(a) any arrangements that would produce debits or credits under Part 5 of CTA 2009 (loan relationships and deemed loan relationships) (“a loan relationship”), or

(b) a loan relationship and a relevant contract (within the meaning of Part 7 of that Act (derivative contracts)) taken together, where the relevant contract is entered into entirely as a hedge of risk in connection with the loan relationship.

Effective tax mismatch outcome

217D

(1) Provision between the company and the other party has an effective tax mismatch outcome for an accounting period if the corresponding amount is less than 80% of the underlying corporation tax amount.

(2) “The underlying corporation tax amount” is the amount determined by multiplying the amount of the unassessed transfer pricing profits by the underlying corporation tax rate (within the meaning of section 217A(4)).

(3) “The corresponding amount” means the amount (which may be nil) of relevant tax—

(a) that is due and payable by the other party and that—

(i) where it has been paid, has not been refunded and would not be refunded if all reasonable steps were taken to secure that it was refunded;

(ii) otherwise, would remain due and payable if all reasonable steps were taken to minimise the amount, and

(b) charged (in any period) on profits that correspond to the unassessed transfer pricing profits.

(4) The steps mentioned in subsection (3)(a) include—

(a) claiming, or otherwise securing the benefit of, reliefs, deductions, reductions or allowances, and

(b) making elections for the purposes of the relevant tax.

(5) For the purposes of subsection (3)—

(a) an amount of relevant tax is refunded if and to the extent that—

(i) any repayment of tax, or any payment in respect of a credit for tax, is made to any person, and

(ii) that repayment or payment is directly or indirectly in respect of the whole or part of the amount of relevant tax paid by the other party;

(b) any withholding tax which is due and payable on payments made to the other party is (unless it is refunded within the meaning of paragraph (a)) to be treated as tax which is due and payable by the other party (and not the person making the payment).

(6) Where the other party is a transparent entity, the provision is to be treated as having an effective tax mismatch outcome for an accounting period unless HMRC is satisfied that it does not have such an outcome for the accounting period.

(7) For the purposes of this section, the other party is a “transparent entity” if, for the purposes of relevant tax charged under the law of the territory in which the other party is legally constituted, profits that correspond to the unassessed transfer pricing profits are treated as the income or profits of a person or persons other than the other party.

(8) Where the other party is a transparent entity—

(a) references in this section to relevant tax that is due and payable or paid by the other party include a reference to relevant tax that is due and payable or paid by any person as a result of profits which correspond to the unassessed transfer pricing profits being treated for the purposes of relevant tax charged under the law of any territory as the income or profits of that person;

(b) subsection (5)(b) applies to any such persons as it applies to the other party.

(9) In this section “relevant tax” means—

(a) income tax,

(b) corporation tax on income,

(c) any amount chargeable as if it were corporation tax or treated as if it were corporation tax (other than the CFC charge within the meaning of Part 9A of this Act), or

(d) any foreign tax.

Tax design condition

217E

(1) The tax design condition is met if it is reasonable to assume that the structure of—

(a) the transaction or series of transactions by which the provision to which the unassessed transfer pricing profits relate is imposed, or

(b) any arrangements to which the transaction or series of transactions relate,

is designed to have the effect of reducing, eliminating or delaying the liability of any person to pay UK tax.

(2) In subsection (1)—

(a) “arrangements” means any scheme or arrangement of any kind (whether or not it is, or is intended to be, legally enforceable);

(b) “UK tax” means income tax, corporation tax or capital gains tax.

Chapter 3 — Assessment

Preliminary notices

217F

(1) A designated officer may issue a preliminary notice to a company if they consider that the company has unassessed transfer pricing profits by virtue of section 217B.

(2) A preliminary notice issued under this section must —

(a) state the accounting period to which the unassessed transfer pricing profits relate;

(b) set out the officer’s best judgement of the amount of unassessed transfer pricing profits;

(3) A preliminary notice under this section may not be issued in respect of an accounting period more than 4 years after the end of that period.

Representations by the company

217G

(1) Where a preliminary notice is issued to a company, the company may make representations to a designated officer in accordance with this section

(2) Representations are only made in accordance with this section if—

(a) they are made in writing,

(b) they are made within the period of 30 days beginning with the day on which the officer issued the preliminary notice, and

(3) Those grounds are—

(a) that there is an arithmetical error in the calculation of any profits stated in the preliminary notice or an error in a figure on which an assumption in the notice is based;

(b) that one or both of the conditions in section 217C(1)(a) and (c) are not met.

(4) But where the preliminary notice sets out that the basis on which the officer considers the condition mentioned in section 217C(1)(a) is met is because the other party is a transparent entity, representations are also made in accordance with this section if they are—

(a) made within the period of 60 days beginning with the day on which the officer issued the preliminary notice, and

(b) made solely on the grounds that the condition in section 217C(1)(a) is not met.

Assessment

217H

(1) This section applies where—

(a) a designated officer has issued a preliminary notice to a company under section 217F in relation to the company’s unassessed transfer pricing profits for an accounting period, and

(b) a designated officer has considered any representations made by the company in accordance with section 217G.

(2) A designated officer may assess the company to corporation tax at the UTPP rate on the unassessed transfer pricing profits that the company has for the period by virtue of section 217B.

(3) But where an officer of HMRC is required by a direction under paragraph 33 of Schedule 18 to FA 1998 to give a relevant closure notice, an assessment under this section may not be made before the relevant closure notice is given.

(4) An assessment under this section must be made before—

(a) the end of the period of—

(i) in a case where the preliminary notice to which the assessment relates sets out that the basis on which the officer considers the condition mentioned in section 217C(1)(a) is met is because the other party is a transparent entity, 90 days beginning with the day on which the preliminary notice was issued, or

(ii) otherwise, 60 days beginning with the day on which the preliminary notice to which the assessment relates was issued,

(but nothing in this subsection prevents a further preliminary notice being issued), or

(b) if later, in a case where a relevant closure notice required to be given by a direction under paragraph 33 of Schedule 18 to FA 1998 has been given before the end of the period mentioned in paragraph (a), the end of the period of 30 days beginning with the day on which the closure notice was given.

(5) In this section a “relevant closure notice” means a partial or final closure notice in relation to an enquiry into the company tax return for the accounting period mentioned in subsection (1)(a).

Amendment of company tax return by company

217I

(1) This section applies where a designated officer assesses a company’s unassessed transfer pricing profits for an accounting period under section 217H.

(2) At any time before the end of the period for amendments, the company may amend its company tax return for the accounting period so that its self-assessment more fully reflects the transfer pricing requirement to which the unassessed transfer pricing profits relate.

(3) In this Chapter “the period for amendments” means the period of 15 months beginning with the day after the day on which the designated officer assesses the company’s unassessed transfer pricing profits under section 217H.

(4) If, before the end of the period of 15 months referred to in subsection (3), a designated officer and the company agree (in writing) that the period for amendments is to terminate, the period ends when that agreement is made.

(5) An amendment under subsection (2) may not be made in the last 21 days of the period for amendments, unless the period for amendments ends by agreement in accordance with subsection (4).

(6) Paragraph 31(3) of Schedule 18 to FA 1998 (amendment not to take effect during enquiry) does not apply in relation to an amendment made under subsection (2).

Amendment of assessment by HMRC

217J

(1) This section applies where a designated officer assesses a company’s unassessed transfer pricing profits for an accounting period under section 217H.

(2) If at any time before the end of the period for amendments a designated officer is satisfied that the total corporation tax charged at the UTPP rate on the company’s unassessed transfer pricing profits for the period is excessive, the designated officer must amend or withdraw the assessment accordingly.

(3) If at any time (whether or not before the end of the period for amendments) a designated officer is satisfied that one or more of the conditions mentioned in section 217C(1) do not apply in respect of unassessed transfer pricing profits so assessed, the designated officer must—

(a) withdraw the assessment, or

(b) amend the assessment to assess the unassessed transfer pricing profits to corporation tax not at the UTPP rate.

(4) Where an assessment is amended under subsection (2) or (3) any tax overpaid must be repaid.

(5) If a designated officer is satisfied at any time before the end of the period for amendments that the total corporation tax charged at the UTPP rate on the company’s unassessed transfer pricing profits for the period is insufficient, the designated officer may amend the assessment accordingly.

(6) An amendment under subsection (5) may not be made in the last 30 days of the period for amendments, unless the period for amendments ends by agreement in accordance with section 217I(4).

No postponement except before assessment is finalised for tax on same profits

217K

(1) This section applies where—

(a) a designated officer has assessed a company’s unassessed transfer pricing profits for an accounting period under section 217H or section 217J(5), and

(b) the amount of paid relevant tax is greater than nil.

(2) The company may—

(a) first apply by notice in writing to HMRC for a determination of the amount of the corporation tax charged on the unassessed transfer pricing profits the payment of which is to be postponed until the assessment is finalised (see subsection (3));

(b) where such a determination is not agreed, refer the application for a determination to the tribunal within the period of 30 days beginning with the date of the document notifying the company of HMRC’s determination.

(3) For the purposes of this section—

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