Details of the Section
2.Subsection (1) provides that where sections 80 or 81 apply, then section 83 describes the circumstances where no taxable diverted profits arise; and sections 84 and 85 describe how the taxable diverted profits are determined when they arise.
3.Subsection (2) signposts section 96, which sets out how a designated HM Revenue & Customs officer estimates profits when issuing a preliminary notice under section 93 or a charging notice under section 95.
4.Subsection (3) introduces subsections (4) to (9), which define key expressions used in sections 83 to 85.
5.Subsection (4) defines “The material provision” as having the same meaning as in section 80.
6.Subsection (5) defines “The relevant alternative provision”. It involves considering what provision the company would have made between itself and a connected company or connected companies had tax not been a relevant consideration.
7.Subsection (6) sets out that making or imposing no provision is treated as making or imposing an alternative provision.
8.Subsection (7) explains the circumstances where the actual provision condition is met. This involves considering whether the provision actually made results in a deduction in computing UK taxable profits (and leaving aside any adjustment that might be made under transfer pricing rules) but where the alternative provision would not have involved those deductions leading to relevant taxable income of a connected company.
9.Subsection (8) explains how to determine the relevant taxable income of a company for a period. It considers what would have been chargeable to UK corporation tax had that company been within the charge to UK corporation tax, making allowances for a just and reasonable amount of expenses that would have deductible in computing those taxable profits.
10.Subsection (9) defines what is meant by a “connected company” for these purposes.
