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Finance Act 1948

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This is the original version (as it was originally enacted).

69Payments of interest, etc., between connected companies

(1)Subject to the provisions of this section, paragraph (b) of subsection (5) of section forty-two of the Finance Act, 1938 (which subsection provides in the case of certain payments by one body corporate to another connected with it, by paragraph (a) thereof, that the payment shall not be an allowable deduction in computing profits of the payer and, by paragraph (b) thereof, that the payment shall not be included in computing profits of the recipient) shall not have effect as respects any payment made to a body corporate resident in the United Kingdom.

(2)The preceding subsection shall not apply to a payment—

(a)which is made while a notice given under subsection (1) of section twenty-two of the Finance Act, 1937 (which enables a principal company to elect that the profits or losses of a subsidiary shall be treated as profits or losses of the principal company) either by the payer or the recipient is in force with respect to the other, or notices so given by a third body corporate are in force with respect both to the payer and the recipient; or

(b)which by virtue of paragraph (c) of subsection (1) of section thirty-six of the Finance Act, 1947 (which relates to amounts deemed to be distributions by a director-controlled company) falls to be treated as part of the gross relevant distributions to proprietors of the payer for any chargeable accounting period.

(3)Where a payment, by virtue of the said paragraph (a) of subsection (5) of section forty-two of the Finance Act, 1938, falls to be disallowed in computing the profits of the payer and, by virtue of subsection (1) of this section, falls to be taken into account in computing the profits of the recipient, the profits tax chargeable on the recipient for the chargeable accounting period in which the payment is received shall be reduced by ten per cent. of the amount of the payment, or of the amount of the profits of the recipient chargeable for that period to the profits tax, whichever is the less.

(4)Where a notice under the said subsection (1) of section twenty-two of the Finance Act, 1937, by a third body corporate is in force with respect to the recipient of the payment, the last preceding subsection shall apply as if for any reference therein to profits tax chargeable on the recipient for the chargeable accounting period in which the payment is received, and to the profits of the recipient chargeable for that period to the profits tax, there were respectively substituted a reference to profits tax chargeable on the third body corporate for the corresponding chargeable accounting period of that body corporate and to the profits of the third body corporate chargeable for that period to the profits tax.

(5)Neither the said subsection (5) of section forty-two of the Finance Act, 1938, nor. any of the preceding provisions of this section shall apply to any payment if—

(a)the recipient is resident in the United Kingdom ; and

(b)the payer and the recipient and, where both the payer and the recipient are subsidiaries of a third body corporate, that third body corporate, jointly elect that the said subsection (5) shall not apply to payments by the said payer to the said recipient; and

(c)the payment is one to which the election applies. Any such election—

(i)shall specify the first payment to which the election is to apply ;

(ii)must be made by notice in writing to the Commissioners given before the expiration of six months from the end of the chargeable accounting period of the recipient in which the said payment is made or within such longer time as the Commissioners may in any case allow ; and

(iii)shall apply to that payment and all subsequent payments by the said payer to the said recipient.

(6)The preceding provisions of this section shall have effect, and shall be deemed always to have had effect, as if they had been part of the provisions of Part IV of the Finance Act, 1947, and any such additional assessments shall be made as are necessary to give effect to this section.

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