Paragraph 25 Transfers of intangible fixed assets

Section 845 of CTA 2009 (transfer between company and related party treated as at market value) is amended as follows.

In subsection (4) omit paragraph (a).

After that subsection insert—

“(4ZA)

But the basic rule does not apply in relation to a transfer if—

(a)

the transfer is a cross-border transfer, and

(b)

the transfer is subject to transfer pricing.

(4ZB)

See also section 846 for a different rule where—

(a)

the basic rule doesn’t apply as a result of subsection (4ZA), and

(b)

the profits and losses of the company or the related person are not required, under Part 4 of TIOPA 2010, to be calculated as if the arm’s length provision had been made instead of the provision comprising the transfer or of which the transfer forms part.

(4ZC)

Where, as a result of section 846 or Part 4 of TIOPA 2010, the profits and losses of the company or the related person are to be calculated as if the arm’s length provision had been made instead of the actual provision for the transfer, the transfer is treated for all purposes of the Taxes Acts as being for the price it would have under that arm’s length provision (as respects both the company and the related party).

(4ZD)

For the purposes of subsection (4ZA)(a) a transfer is a cross-border transfer if, at the time of the transfer, the related party is—

(a)

a UK resident company, but only if it has a qualifying permanent establishment in a territory outside the United Kingdom,

(b)

a non-UK resident company, other than a non-UK resident company that has a permanent establishment in the United Kingdom with a relevant connection to the transferred asset,

(c)

a non-UK resident individual, other than an individual that carries on a trade, profession or vocation in the United Kingdom through a branch or agency that has a relevant connection to the transferred asset, or

(d)

a partnership, but only if all of its members are non-UK resident or it has a qualifying permanent establishment in a territory outside the United Kingdom.

(4ZE)

Where the related party has a permanent establishment in a territory outside the United Kingdom, that permanent establishment is “qualifying” if—

(a)

exemption adjustments under section 18A(1) of CTA 2009 (exemption for profits or losses of foreign permanent establishments) would be made in calculating the taxable profits of the related party, and

(b)

those adjustments include adjustments in respect of the transferred asset.

(4ZF)

A permanent establishment of the related party in the United Kingdom has a relevant connection to the transferred asset if the asset is, in accordance with Chapter 4 of Part 2, attributable to that permanent establishment.

(4ZG)

A branch or agency of the related party has a relevant connection to the transferred asset if—

(a)

where the related party is the transferor, it was used or held for the purposes of the branch or agency immediately before the transfer, or

(b)

where the related party is the transferee, it was acquired for use by, to be held by or for the purposes of, the branch or agency.”

After subsection (5) insert—

“(6)

In this section “branch or agency”—

(a)

means any factorship, agency, receivership, branch or management, but

(b)

does not include any person within any of the exemptions under sections 835G to 835K of ITA 2007 (persons who are not UK representatives).

(7)

For the purposes of this section and section 846—

• “provision” and “arm’s length provision” are to be construed in accordance with Part 4 of TIOPA 2010 (transfer pricing);

• a transfer is “subject to transfer pricing” if—

  1. (a)

     as a result of Part 4 of TIOPA 2010 (transfer pricing), the profits and losses of the company or the related party are to be calculated for tax purposes as if the arm's length provision to which those credits or debits would relate had been made or imposed instead of the actual provision to which they relate, or

  2. (b)

     those profits would be so calculated if the actual provision —

     1. (i)

        conferred a potential advantage in relation to United Kingdom taxation (within the meaning of that Part) on the company, and

     2. (ii)

        differed from the arm’s length provision.”

For section 846 of CTA 2009 substitute—

“Transfers where provision subject to transfer pricing but section 147(3) or (5) does not apply

846

(1)

This section applies to a person who is a company or related party to whom, or from whom, a transfer of an intangible fixed asset is made if—

(a)

the basic rule in section 845 would apply in relation to that person and that transfer but does not as a result of subsection (4ZA) of that section (provision subject to transfer pricing), and

(b)

the profits and losses of that person are not required, under section 147(3) or (5) of TIOPA 2010, to be calculated as if the arm’s length provision had been made instead of the provision comprising the transfer or of which the transfer forms part.

(2)

Section 147(3) of that Act applies to that person in relation to the provision comprising the transfer, or of which the transfer forms part, as if—

(a)

the reference to the “potentially advantaged person” were to that person, and

(b)

the reference to the “actual provision” were to the provision comprising the transfer or of which the transfer forms part.

See also section 151(3) of that Act for provision about applying the arm’s length provision in relation to intangible fixed assets.”