Part 5Loan Relationships
Chapter 15Tax avoidance
Transactions not at arm's length: general
446Bringing into account adjustments made under F1Part 4 of TIOPA 2010
(1)
This section deals with the credits and debits which are to be brought into account for the purposes of this Part as a result of F2Part 4 of TIOPA 2010 (provision not at arm's length) applying in relation to a company's loan relationships or related transactions.
(2)
Subsection (3) applies if under F3Part 4 of TIOPA 2010 an amount (“the imputed amount”) is treated as an amount of profits or losses arising to a company from any of its loan relationships or related transactions.
(3)
Credits or debits relating to the imputed amount are to be brought into account for the purposes of this Part to the same extent as they would be in the case of an actual amount of such profits or losses.
(4)
Subsection (5) applies if under F4Part 4 of TIOPA 2010 an amount is treated as interest payable under any of a company's loan relationships.
(5)
Credits or debits relating to that amount are to be brought into account for the purposes of this Part to the same extent as they would be in the case of an actual amount of such interest.
(6)
Subsection (7) applies if under F5Part 4 of TIOPA 2010 an amount is treated as expenses incurred by a company under or for the purposes of any of its loan relationships or related transactions.
(7)
Debits relating to the amount are to be brought into account for the purposes of this Part to the same extent as they would be in the case of an actual amount of such expenses.
F6(8)
Where a company makes a claim under this subsection, any qualifying credit of the company which (ignoring this subsection) would be brought into account for the purposes of this Part is not to be brought into account.
(9)
But subsection (8) does not apply—
(a)
if the corresponding profits of the company are less than the corresponding arm’s length profits, or
(b)
to the extent that its application would result in the corresponding profits being less than the corresponding arm’s length profits.
(10)
A credit of a company is a “qualifying credit” to the extent it corresponds to an amount which, as a result of Part 4 of TIOPA 2010, has not previously been brought into account as a debit.
(11)
Where a company makes a claim under this subsection, neither subsection (3) nor (5) of section 147 of TIOPA 2010 applies to prevent the bringing into account of a qualifying debit which (ignoring this subsection) would not be brought in account for the purposes of this Part as a result of the application of either subsection.
(12)
But subsection (11) does not apply—
(a)
if the corresponding profits of the company are less than the corresponding arm’s length profits, or
(b)
to the extent that its application would result in the corresponding profits being less than the corresponding arm’s length profits.
(13)
A debit of a company is a “qualifying debit” to the extent it corresponds to a matched credit.
(14)
The relevant amount of a credit of a company is a “matched credit” if—
(a)
the credit was previously brought into account,
(b)
the credit relates to actual provision made or imposed between the company and another person to which neither subsection (3) or (5) of section 147 of that Act applied in relation to the company,
(c)
the only reason neither subsection applied in relation to the company and the actual provision was because the actual provision did not confer a potential advantage on the company (see section 155 of that Act), and
(d)
if the profits of the company were calculated as if the arm's length provision had been made or imposed instead of the actual provision, the credit would not have been brought into account to some extent.
(15)
The “relevant amount” of a credit means so much of the credit as would not have been brought into account if the arm's length provision had been made or imposed instead of the actual provision to which the credit relates.
(16)
For the purposes of subsections (9) and (12), the corresponding profits of the company means the sum of the profits and losses of the company—
(a)
for each accounting period for which there was actual provision made or imposed between the company and another person (“the other affected person”) to which the qualifying credit or qualifying debit relates,
(b)
that arose from—
(i)
each such provision where the profits and losses of the company were not (as a result of Part 4 of TIOPA 2010) required to be calculated as if the arm’s length provision had been made or imposed instead of that provision, and
(ii)
the arm’s length provision in relation to each such provision where the profits and losses of the company are to be calculated as if that arm’s length provision had been made or imposed instead (as a result of that Part), and
(c)
ignoring the effect (if any) of Part 10 of TIOPA 2010 (corporate interest restriction).
(17)
For the purposes of those subsections, the corresponding arm’s length profits means the corresponding profits calculated as if the arm’s length provision had been made or imposed instead of the actual provision referred to in subsection (16)(a) in each case.
(18)
In this section “actual provision”, “arm’s length provision” and “potential advantage” are to be construed in accordance with Part 4 of TIOPA 2010 (transfer pricing).
(19)
A claim under subsection (8) or (11) must be made—
(a)
within the period of two years after the end of the accounting period to which the claim relates, or
(b)
within such further period as an officer of Revenue and Customs may allow.
(20)
A claim may not be made under either of those subsections if—
(a)
the profits and losses of other affected person were required, for any chargeable period of that person, to be calculated as if the arm’s length provision had been made or imposed instead of the actual provision relating to the qualifying credit or qualifying debit, and
(b)
those profits and losses were not so calculated for that chargeable period.