Taxation (International and Other Provisions) Act 2010

155 “Potential advantage” in relation to United Kingdom taxation

(1) Subsection (2) applies for the purposes of this Part.

(2) The actual provision confers a potential advantage on a person in relation to United Kingdom taxation wherever, disregarding this Part, the effect of making or imposing the actual provision, instead of the arm’s length provision, would be one or both of Effects A and B.

(3) Effect A is that a smaller amount (which may be nil) would be taken for tax purposes to be the amount of the person’s profits for any chargeable period.

(4) Effect B is that a larger amount (or, if there would not otherwise have been losses, any amount of more than nil) would be taken for tax purposes to be the amount for any chargeable period of any losses of the person.

(5) In determining for the purposes of subsection (3) or (4) the amount that would be taken for tax purposes to be the amount of the profits or losses for a year of assessment in the case of a non-UK resident, there is to be left out of account any income of that person which is—

(a) disregarded income within the meaning given by section 813 of ITA 2007 (limits on liability to income tax of non-UK residents), or

(b) disregarded company income within the meaning given by section 816 of that Act.

(6) For the purposes of subsections (2) to (4)—

(a) Part 7 (tax treatment of financing costs and income), and

(b) paragraph E of the list in section 1000(1) of CTA 2010 (excessive interest etc treated as a distribution),

are to be disregarded.