(1)This section applies where—
(a)the relationship between two companies is as mentioned in subsection (2) below;
(b)one of the companies makes to the other a payment which, for the purposes of corporation tax, is a charge on income of the company making it; and
(c)in the hands of the company receiving it, the payment is chargeable to tax under Case III of Schedule D.
(2)The relationship between two companies which is referred to in subsection (1)(a) above is—
(a)that one company controls the other; or
(b)that another person controls both companies; or
(c)that one company is a 51 per cent. subsidiary of the other; or
(d)that both companies are 51 per cent. subsidiaries of another company;
and section 840 applies for the purposes of this section.
(3)In a case where this section applies, the payment referred to in subsection (1)(b) above shall be treated for the purposes of corporation tax as received by the company to which it is paid on the same day as that on which it is for those purposes treated as paid by the company paying it.
(4)Subject to subsection (5) below, where the payment referred to in subsection (1)(b) above is a "relevant payment" for the purposes of Schedule 16, it shall be treated for the purposes of that Schedule as received on the same day as that on which, by virtue of subsection (3) above, it is treated as received for the purposes of corporation tax; and the reference in paragraph 5(1) of that Schedule to the accounting period in which the payment is received shall be construed accordingly.
(5)Subsection (4) above does not apply if the day on which the payment would be treated as received apart from that subsection falls within the same accounting period (of the receiving company) as the day on which it would be treated as received under that subsection.