Taxation (International and Other Provisions) Act 2010

196 Balancing payments between affected persons: no charge to, or relief from, tax

(1) If each of the qualifying conditions (see section 195) is met, subsection (2) applies—

(a) to the balancing payment if, or so far as, its amount does not exceed the available compensating adjustment, or

(b) to the balancing payments if, or so far as, their total amount does not exceed the available compensating adjustment.

(2) Any payment to which this subsection applies—

(a) is not to be taken into account in calculating profits or losses of either of the affected persons for the purposes of income tax or corporation tax, and

(b) is not for any purpose of the Corporation Tax Acts to be regarded as a distribution.

(3) In subsection (1) “the available compensating adjustment” means the difference between PL1 and PL2 where—

• PL1 is the profits and losses of the disadvantaged person calculated for tax purposes on the basis of the actual provision, and

• PL2 is the profits and losses of the disadvantaged person as (or as they would be) calculated for tax purposes on a claim under section 174.

(4) For the purposes of subsection (3), take PL1 or PL2—

(a) as a positive amount if it is an amount of profits, and

(b) as a negative amount if it is an amount of losses.

(5) In this section, the following expressions have the meaning given by section 195—

• “the balancing payment” and “the balancing payments”, and

• “the disadvantaged person”.