Taxation (International and Other Provisions) Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Taxation (International and Other Provisions) Bill

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 3 — Miscellaneous provisions
75

Cases about being taxed otherwise than in accordance with double taxation arrangements
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
5
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
10
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
15
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
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(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.
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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,
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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
35
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—
40
(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.

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 3 — Miscellaneous provisions
76

The Arbitration Convention
126
Meaning of “the Arbitration Convention”
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
5
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
10
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
15
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
20
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.
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128
Disclosure under the Convention
(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
30
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,
35
(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
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Majesty’s Revenue and Customs.

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 3 — Miscellaneous provisions
77

Disclosure of information
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,
5
(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
10
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
15
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
20
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
25
(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,
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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
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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,
40
(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.

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 3 — Miscellaneous provisions
78

Interpretation of double taxation arrangements
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
5
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
10
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
15
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
20
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.
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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.
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(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
35
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,
40
(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.

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 3 — Miscellaneous provisions
79

(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
5
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—
10
(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—
15
(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
20
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
25
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
30
(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,
35
(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
40
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,
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Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 3 — Miscellaneous provisions
80

(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.
5
(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
10
(“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
15
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).
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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
25
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
30
(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.
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(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
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transaction, or under each of the transactions in the series of
transactions, in the absence of a special relationship.