Finance Act 2022

PART 6 Transfer pricing and corporate interest restriction rules

Transfer pricing: participation condition always met for investors in a QAHC etc

40 (1) For the purposes of section 147(1) of TIOPA 2010 (basic pre-condition), where the affected persons are—

(a) a QAHC, and

(b) a person with a sufficient connection to the QAHC,

the participation condition in section 148 of that Act is treated as met.

(2) An affected person (“A”) has a sufficient connection to the QAHC if—

(a) A has a relevant interest in the QAHC or in an enhanced class of the QAHC, or

(b) any of the persons with such an interest has a relationship with A such that the participation condition in that section would have been met had the affected persons been A and that person (instead of A and the QAHC).

(3) In this paragraph, and in paragraph 41, “affected person” is to be construed in accordance with Part 4 of that Act.

Transfer pricing: no small and medium-sized enterprise exemption

41 (1) Section 166(1) of TIOPA 2010 (exemption for small and medium-sized enterprises from basic transfer pricing rule) does not apply to a potentially advantaged person if that person or the other affected person is a QAHC.

(2) In this paragraph “potentially advantaged person” is to be construed in accordance with Part 4 of that Act.

Application of corporate interest restriction rules (non-consolidation of certain subsidiaries)

42 (1) Sub-paragraph (2) applies where—

(a) a QAHC is a member of a worldwide group,

(b) the QAHC has a subsidiary (“S”) which it holds as a market value investment,

(c) apart from that sub-paragraph, S would be a member of the group, and

(d) the management of S and its subsidiaries is not coordinated to any extent with the management by any person of any other entity.

(2) For the purposes of Part 10 of TIOPA 2010 (corporate interest restriction), this paragraph and paragraph 43—

(a) the group does not include S or its subsidiaries, and

(b) accordingly, neither S nor any of its subsidiaries is regarded as a consolidated subsidiary of any member of the group.

(3) For the purposes of this paragraph and paragraph 43, a QAHC holds an interest in an entity as “a market value investment” if—

(a) the QAHC holds the interest as an investment, and

(b) the QAHC judges the value that the interest has to it wholly or mainly by reference to the market value of the interest.

(4) Expressions used in this paragraph or in paragraph 43 that are defined for the purposes of Part 10 of TIOPA 2010 have the same meaning they have in that Part.

(5) In this paragraph, and in paragraph 43, “subsidiary” has the meaning given by international accounting standards (but see section 494 of TIOPA 2010 for the definition of “wholly-owned subsidiary”).

Application of corporate interest restriction rules (consolidation of QAHC stacks)

43 (1) Sub-paragraph (2) applies where—

(a) a QAHC (“P”) would not, apart from that sub-paragraph, be a member of a multi-company worldwide group,

(b) P has a wholly-owned subsidiary (“W”) which it does not hold as a market value investment,

(c) W is a QAHC, and

(d) P is either—

(i) not a wholly-owned subsidiary of another QAHC, or

(ii) is such a subsidiary but is held as a market value investment.

(2) For the purposes of Part 10 of TIOPA 2010, paragraph 42 and this paragraph—

(a) P is the ultimate parent of a worldwide group, and

(b) W, and any consolidated subsidiary of W—

(i) is a member of that group and not of any other worldwide group, and

(ii) is a consolidated subsidiary of P.

(3) Sub-paragraph (4) applies where—

(a) a QAHC (“M”) is a member of a multi-company worldwide group (“G”) (including as a result of the application of sub-paragraph (2) or the previous application of this sub-paragraph),

(b) M has a wholly-owned subsidiary (“N”) which it does not hold as a market value investment,

(c) N is a QAHC, and

(d) apart from that sub-paragraph, N would not be a member of G.

(4) For the purposes of Part 10 of TIOPA 2010, paragraph 42 and this paragraph, N, and any consolidated subsidiary of N—

(a) is a member of G and not of any other worldwide group, and

(b) is a consolidated subsidiary of M and any other member of G in relation to which M is a consolidated subsidiary.