Article 5 The benefits condition

(1)

The benefits condition is satisfied unless more than 50% of the benefits of the relevant business activity accrue, directly or indirectly, to one or more third parties.

(2)

For the purposes of paragraph (1), benefits that accrue to a person in his capacity as a member of a body corporate which controls all of the other members of the group (or, where the body is or will be a member of the group, all of the other members apart from itself) shall not be regarded as accruing to a third party.

(3)

The following are benefits of a business activity for the purposes of paragraph (1)—

(a)

profits (whether or not distributed);

(b)

charges for managing the business activity (including charges for providing staff to manage it);

(c)

the amounts, if any, by which any other charges made to the body exceed the open market value^f1 of the goods or services concerned.

(4)

For the purposes of paragraph (1), if there are no such benefits, the business activity shall be deemed to generate profits of £100.

Annotations

Footnotes

f1: Section 19(5) of the Value Added Tax Act 1994 defines “open market value”.