|Finance (No. 2) Bill - continued||House of Commons|
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|TRANSFER PRICING ETC: NEW REGIME|
|The Schedule inserted after Schedule 28A to the Taxes Act 1988 is as follows:-|
|PROVISION NOT AT ARM'S LENGTH|
Basic rule on transfer pricing etc.
| 1. - (1) This Schedule applies where- |
| (2) Subject to paragraphs 8, 10 and 13 below, if the actual provision- |
the profits and losses of the potentially advantaged person or, as the case may be, of each of the potentially advantaged persons shall be computed for tax purposes as if the arm's length provision had been made or imposed instead of the actual provision.
| (3) For the purposes of this Schedule the cases in which provision made or imposed as between any two persons is to be taken to differ from the provision that would have been made as between independent enterprises shall include the case in which provision is made or imposed as between any two persons but no provision would have been made as between independent enterprises; and references in this Schedule to the arm's length provision shall be construed accordingly.|
Principles for construing rules in accordance with OECD principles
| 2. - (1) This Schedule shall be construed (subject to paragraphs 8 to 11 below) in such manner as best secures consistency between- |
| (2) In this paragraph "the OECD model" means- |
| (3) In this paragraph "the transfer pricing guidelines" means- |
Meaning of "transaction" and "series of transactions"
| 3. - (1) In this Schedule "transaction" includes arrangements, understandings and mutual practices (whether or not they are, or are intended to be, legally enforceable).|
| (2) References in this Schedule 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 shall not be prevented by reason only of one or more of the matters mentioned in sub-paragraph (4) below from being regarded for the purposes of this Schedule as a series of transactions by means of which provision has been made or imposed as between any two persons.|
| (4) Those matters are- |
| (5) In this paragraph, "arrangement" means any scheme or arrangement of any kind (whether or not it is, or is intended to be, legally enforceable).|
Participation in the management, control or capital of a person
| 4. - (1) For the purposes of this Schedule a person is directly participating in the management, control or capital of another person at a particular time if, and only if, that other person is at that time- |
| (2) For the purposes of this Schedule a person ("the potential participant") is indirectly participating in the management, control or capital of another person at a particular time if, and only if- |
| (3) The rights and powers referred to in sub-paragraph (2)(a) above are- |
| (4) Rights and powers fall within this sub-paragraph to the extent that they- |
| (5) In sub-paragraphs (3)(b) to (d) and (4) above, the references to a person's rights and powers include references to any rights or powers which he either- |
| (6) In paragraph (d) of sub-paragraph (3) above, the reference to rights and powers which would be attributed to a connected person if he were the potential participant includes a reference to rights and powers which, by applying that paragraph wherever one person is connected with another, would be so attributed to him through a number of persons each of whom is connected with at least one of the others.|
| (7) For the purposes of this paragraph a person ("the potential major participant") is a major participant in another person's enterprise at a particular time if at that time- |
| (8) For the purposes of this paragraph the 40 per cent. test is satisfied in the case of each of two persons wherever each of them has interests, rights and powers representing at least 40 per cent. of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the subordinate.|
| (9) For the purposes of this paragraph- |
shall be determined after attributing to each of the persons all the rights and powers attributed to a potential participant for the purposes of sub-paragraph (2)(a) above.
| (10) References in this paragraph- |
include references to rights or powers which are exercisable by that person, or (when acquired by that person) will be exercisable, only jointly with one or more other persons.
| (11) For the purposes of this paragraph two persons are connected with each other if- |
| (12) In sub-paragraph (11) above- |
|© Parliamentary copyright 1998||Prepared 6 April 1998|