2878.This section provides that the exemption will not apply where the interest or royalties have not been paid between independent parties acting at arm’s length. This is achieved by reference to a “special relationship” (a term used in double taxation treaties) between the payer and the beneficial owner of the income such that the payments will not be at arm’s length. The section is based on section 103 of FA 2004.
2879.Subsection (3) provides that where a claim to relief under a double taxation treaty would provide greater relief from tax than is available under this exemption the company may chose to claim relief under the treaty.