Finance Act 2014

Transfer pricing

75 Transfer pricing: restriction on claims for compensation adjustments

(1) Chapter 4 of Part 4 of TIOPA 2010 (transfer pricing: position of disadvantaged person) is amended as follows.

(2) In section 174 (claim by the affected person who is potentially advantaged), in subsection (3), before the entry for section 175 insert—

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

(3) After that section insert—

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

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.”

(4) After section 187 insert—

“Treatment of interest where claim prevented by section 174A

187A Excess interest treated as a qualifying distribution

(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 qualifying distribution).”

(5) The amendments made by this section have effect in relation to any amount arising on or after 25 October 2013, except pre-commencement interest.

(6) “Pre-commencement interest” means an amount of interest to the extent that it is, in accordance with generally accepted accounting practice, referable to a period before 25 October 2013.