Taxation (International and Other Provisions) Bill

House of Commons

Session 2009 - 10
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Taxation (International and Other Provisions) Bill

Taxation (International and Other Provisions) Bill
Part 4 — Transfer pricing
Chapter 8 — Supplementary provisions and interpretation of Part
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(b)
setting out the terms of the agreement.
(6)
In this section—
“the Commissioners” means the Commissioners for Her Majesty’s
Revenue and Customs,
“officer” means officer of Revenue and Customs, and
5
“transfer-pricing determination” has the meaning given by section 208(2).
210
The requirement for the Commissioners’ sanction
(1)
Subsection (2) applies in relation to a transfer-pricing determination made for
a purpose specified in section 208(3)(a) to (d) if, under section 208(1), the
determination requires the Commissioners’ sanction.
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(2)
If the closure notice, or notice under section 30B(1) of TMA 1970, is given to a
person—
(a)
without the determination, so far as it is taken into account in the
notice, having been approved by the Commissioners, or
(b)
without a copy of the Commissioners’ approval having been served on
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the person at or before the time when the notice is given to the person,

the notice has effect as if given in the terms (if any) in which it would have been
given had the determination not been taken into account.
(3)
Subsection (4) applies in relation to a transfer-pricing determination made for
a purpose specified in section 208(3)(e) to (g) if, under section 208(1), the
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transfer-pricing determination requires the Commissioners’ sanction.
(4)
If notice of the assessment, or notice of the discovery determination, is given to
a person—
(a)
without the transfer-pricing determination, so far as it is taken into
account in the assessment or discovery determination, having been
25
approved by the Commissioners, or
(b)
without a copy of the Commissioners’ approval having been served on
the person at or before the time when the notice is given to the person,

the assessment or discovery determination has effect as if made (and notified)
in the terms (if any) in which it would have been made had the transfer-pricing
30
determination not been taken into account.
(5)
For the purposes of subsections (2) and (4), the Commissioners’ approval of a
transfer-pricing determination requiring their sanction—
(a)
must be given specifically in relation to the case concerned and must
apply to the amount determined, but
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(b)
subject to that, may be given by the Commissioners (either before or
after the determination is made) in any such form or manner as the
Commissioners may determine.
(6)
In this section “the Commissioners” means the Commissioners for Her
Majesty’s Revenue and Customs.
40
211
Restriction of right to appeal against Commissioners’ approval
(1)
In subsection (2)—
“appeal” means an appeal by virtue of any provision of—
(a)
TMA 1970, or

Taxation (International and Other Provisions) Bill
Part 4 — Transfer pricing
Chapter 8 — Supplementary provisions and interpretation of Part
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(b)
Schedule 18 to FA 1998 (company tax returns and related
matters), and
“approved determination” means a determination that, for the purposes
of section 210(2) or (4), has been approved by the Commissioners.
(2)
The matters that may be questioned on so much of an appeal as relates to an
5
approved determination do not include the Commissioners’ approval.
(3)
Subsection (2) does not apply so far as the grounds for questioning the
approval are the same as the grounds for questioning the determination.
(4)
In this section “the Commissioners” means the Commissioners for Her
Majesty’s Revenue and Customs.
10
Appeals
212
Appeals
(1)
The appeals within this subsection are—
(a)
an appeal under section 31 of, or Schedule 1A to, TMA 1970,
(b)
an appeal under paragraph 34(3) of Schedule 18 to FA 1998 against an
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amendment of a company’s return, and
(c)
an appeal under paragraph 48 of that Schedule against a discovery
assessment or a discovery determination.
(2)
Subsection (3) applies so far as the question in dispute on an appeal within
subsection (1)—
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(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—
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(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
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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
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“discovery determination” means a discovery determination under
paragraph 41 of that Schedule.
Effect of Part on capital allowances and chargeable gains
213
Capital allowances
(1)
Nothing in this Part is to be read as affecting the calculation of the amount of
40
any capital allowance or balancing charge made under CAA 2001.

Taxation (International and Other Provisions) Bill
Part 4 — Transfer pricing
Chapter 8 — Supplementary provisions and interpretation of Part
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(2)
Subsection (1) does not apply in relation to claims under section 174.
214
Chargeable gains
(1)
Nothing in this Part is to be read as affecting the calculation in accordance with
TCGA 1992 of the amount of any chargeable gain or allowable loss.
(2)
Nothing in this Part requires the profits and losses of any person to be
5
calculated for tax purposes as if, in the person’s case, instead of income or
losses to be brought into account in connection with the taxation of income,
there were gains or losses to be brought into account in accordance with TCGA
1992.
(3)
Subsections (1) and (2) do not apply in relation to claims under section 174.
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Adjustments
215
Manner of making adjustments to give effect to Part
Any adjustments required to be made under this Part may be made by way of
discharge or repayment of tax, by the modification of any assessment or
otherwise.
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Definitions
216
Meaning of “the relevant activities”
(1)
In this Part “the relevant activities”, in relation to a person (“A”) who is one of
the persons as between whom any provision is made or imposed, means
activities that—
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(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.
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(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.
217
Meaning of “control” and “firm”
(1)
References in this Part to a person controlling a body corporate or firm are to
30
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
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exercisable by a company (“the producer”) which, although it may be
the seller, is not the buyer, and

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(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
5
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.
10
(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
15
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.
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(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 5
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Advance pricing agreements
218
Meaning of “advance pricing agreement”
(1)
In this Part “advance pricing agreement” means a written agreement that—
(a)
is made by the Commissioners with any person (“A”) as a consequence
of an application by A under section 223,
30
(b)
relates to one or more of the matters mentioned in subsection (2), and
(c)
declares that it is an agreement made for the purposes of this section.
(2)
Those matters are—
(a)
if A is not a company, the attribution of income to a branch or agency
through which A has been carrying on a trade in the United Kingdom
35
or is proposing to carry on a trade in the United Kingdom,
(b)
if A is a company, the attribution of income to a permanent
establishment through which A has been carrying on a trade in the
United Kingdom or is proposing to carry on a trade in the United
Kingdom,
40
(c)
the attribution of income to any permanent establishment of A’s,
wherever situated, through which A has been carrying on, or is
proposing to carry on, any business,

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(d)
the extent to which income that has arisen or may arise to A is to be
taken for any purpose to be income arising in a country or territory
outside the United Kingdom,
(e)
the treatment for tax purposes of any provision made or imposed,
whether before or after the date of the agreement, as between A and
5
any associate (see section 219) of A’s, and
(f)
the treatment for tax purposes of any provision made or imposed,
whether before or after the date of the agreement, as between an oil-
related ring-fence trade carried on by A (see section 206) and any other
activities carried on by A.
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219
Meaning of “associate” in section 218(2)(e)
(1)
This section applies for the purposes of section 218(2)(e).
(2)
Two persons are associates in relation to provision made or imposed as
between them if at the time of the making or imposition of the provision—
(a)
one of them is directly or indirectly participating in the management,
15
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 the two persons.
(3)
Two persons are also associates in relation to any provision if section 217(4)
(which applies to provision made or imposed in connection with sales of oil)
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requires the persons to be treated as controlled by the same person at the time
of the making or imposition of that provision.
(4)
For the interpretation of subsection (2), see sections 157(1), 158(4), 159(1) and
160(1) (which have the effect that references in subsection (2) to direct or
indirect participation are to be read in accordance with provisions of Chapter
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2 of Part 4).
220
Effect of agreement on party to it
(1)
Subsection (2) applies if a chargeable period is one to which an advance pricing
agreement relates.
(2)
The Tax Acts have effect in relation to the chargeable period as if, in the case of
30
the person with whom the Commissioners made the agreement, questions
relating to the matters mentioned in section 218(2) are to be determined—
(a)
in accordance with the agreement, and
(b)
without reference to the provisions in accordance with which they
would otherwise be determined.
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(3)
Subsection (2) is subject to—
subsections (4) and (5), and
section 221.
(4)
A question is to be determined as mentioned in subsection (2) only so far as the
agreement provides for the question to be determined in that way.
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(5)
In the case of so much of a question as—
(a)
relates to any matter mentioned in paragraph (e) or (f) of section 218(2),
and

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(b)
is not comprised in a question that relates to a matter within another
paragraph of section 218(2),

reference to a provision is capable of being excluded under subsection (2) by
an advance pricing agreement only if the provision is in Part 4.
221
Effect of revocation of agreement or breach of its conditions
5
(1)
An advance pricing agreement does not have effect in accordance with section
220(2) in relation to any determination of a question if any of conditions A, B
and C is met.
(2)
Condition A is that a time to which the question relates is after a time as from
which an officer has revoked the agreement in accordance with the
10
agreement’s terms.
(3)
Condition B is that the question relates to a time after, or in relation to which,
there has been a failure by a party to the agreement to comply with a significant
provision of the agreement.
(4)
Condition C is that the question relates to a matter as respects which a key
15
condition has not been met or is no longer met.
(5)
A provision of the agreement is “significant” for the purposes of subsection (3)
if compliance with that provision is, under the terms of the agreement, to be a
condition of the agreement’s having effect.
(6)
Any other condition that, under the terms of the agreement, is to be a condition
20
of the agreement’s having effect is a “key condition” for the purposes of
subsection (4).
222
Effect of agreement on non-parties
(1)
Subsections (2), (5) and (6) apply if—
(a)
an advance pricing agreement has effect in relation to any provision
25
(“the actual provision”) made or imposed as between any person (“A”)
and another (“B”), and
(b)
section 220(2) has the effect in A’s case of requiring a question relating
to the actual provision to be determined in accordance with the
agreement rather than by reference to rules which would otherwise be
30
applicable because of Part 4.
(2)
The provisions mentioned in subsection (3) have effect in B’s case on the
assumption that any question within subsection (4) is to be determined, to the
same extent as in A’s case, by reference to the agreement.
(3)
The provisions are—
35
sections 174 to 178 (transfer pricing: claim by disadvantaged person), and
sections 188 and 189 (transfer pricing: adjustment of double taxation relief
if claim made).
(4)
The questions are—
(a)
whether A is a person on whom a potential advantage in relation to
40
United Kingdom taxation is conferred by the actual provision, and
(b)
what constitutes the arm’s length provision in relation to the actual
provision.

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(5)
Subsection (2) has effect subject to any advance pricing agreement made
between the Commissioners and B.
(6)
Any assumptions to be made because of the agreement are “advance-pricing-
agreement assumptions” for the purposes of paragraph (b) of the definition in
section 185(5) of “transfer-pricing determination”.
5
223
Application for agreement
(1)
For the purposes of section 218(1)(a), an application by a person (“A”) is an
application under this section if it complies with subsections (2) to (5).
(2)
It must be an application to the Commissioners for the clarification by
agreement of the effect in A’s case of provisions by reference to which
10
questions relating to any one or more of the matters mentioned in section
218(2) are to be, or might be, determined.
(3)
It must set out A’s understanding of what would in A’s case be the effect, in
the absence of any agreement, of the provisions in relation to which
clarification is sought.
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(4)
It must set out the respects in which it appears to A that clarification is required
in relation to those provisions.
(5)
It must set out how A proposes that matters should be clarified in a manner
consistent with the understanding mentioned in subsection (3).
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Provision in agreement about years ended or begun before agreement made
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(1)
An advance pricing agreement may contain provision relating to chargeable
periods ending before the agreement is made, subject to subsection (2).
(2)
An advance pricing agreement may not contain provision relating to
chargeable periods ending before 27 July 1999.
(3)
If an advance pricing agreement—
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(a)
relates to a chargeable period beginning or ending before the
agreement is made, and
(b)
provides for the manner in which adjustments are to be made for tax
purposes in consequence of the agreement,

the adjustments are to be made for those purposes in the manner provided for
30
in the agreement.
225
Modification and revocation of agreement
(1)
Subsection (2) applies if an advance pricing agreement provides for the
modification, or revocation, of the agreement—
(a)
by the Commissioners, or
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(b)
by an officer.
(2)
The agreement may provide for the modification or revocation to take effect as
from such time as the Commissioners or officer may determine.
(3)
A time determined under subsection (2) may be (but need not be) a time before
the modification is made or the agreement is revoked.
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