Income and Corporation Taxes Act 1988

Elimination of double counting U.K.

6 [F1 (1) This paragraph applies where—

(a) only one of the affected persons (“the advantaged person”) is a person on whom a potential advantage in relation to United Kingdom taxation is conferred by the actual provision; and

(b) the other affected person (“the disadvantaged person”) is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities.]

(2) Subject to sub-paragraphs (3) to (6) and [F2 paragraphs][F3 6C, 6D,] 7 [F4 and 8] below, on the making of a claim by the disadvantaged person for the purposes of this paragraph—

(a) [F5 the profits and losses of the disadvantaged person shall be computed] for tax purposes as if the arm’s length provision had been made or imposed instead of the actual provision; and

(b) notwithstanding any limit in the Tax Acts on the time within which any adjustment may be made, all such adjustments shall be made in his case as may be required to give effect to the assumption that the arm’s length provision was made or imposed instead of the actual provision.

(3) A claim made by the disadvantaged person for the purposes of this paragraph—

(a) shall not be made unless a computation has been made in the case of the advantaged person on the basis that the arm’s length provision was made or imposed instead of the actual provision; and

(b) must be consistent with the computation made on that basis in the case of the advantaged person.

(4) For the purposes of sub-paragraph (3) above a computation shall be taken to have been made in the case of the advantaged person on the basis that the arm’s length provision was made or imposed instead of the actual provision if, and only if—

(a) the computations made for the purposes of any return by the advantaged person have been made on that basis by virtue of this Schedule; or

(b) a relevant notice given to the advantaged person takes account of a determination in pursuance of this Schedule of an amount falling to be brought into account for tax purposes on that basis.

[F6 (4A) A claim by the disadvantaged person for the purposes of this paragraph shall not be made where—

(a) the condition in paragraph 1(1)(b) above would not be satisfied but for paragraph 4A above;

(b) the actual provision is provision in relation to a security issued by one of the affected persons (“the issuer”);

(c) a guarantee is provided in relation to the security by a person with whom the issuer has a participatory relationship.

In this sub-paragraph “security” and “guarantee” have the same meaning as in paragraph 1A above.

(4B) For the purposes of sub-paragraph (4A) above, the cases where one person has a “participatory relationship” with another are those where—

(a) one of them is directly or indirectly participating in the management, control or capital of the other; or

(b) the same person or persons is or are directly or indirectly participating in the management, control or capital of each of them.

(4C) Paragraph 4A above applies for the purposes of sub-paragraph (4B) above as it applies for the purposes of paragraph 1(1)(b) above.]

(5) Subject to section 111(3)(b) of the Finance Act 1998 (which provides for the extension of the period for making a claim), a claim for the purposes of this paragraph shall not be made except within one of the following periods—

(a) in a case where a return has been made by the advantaged person on the basis mentioned in sub-paragraph (3)(a) above, the period of two years beginning with the day of the making of the return; and

(b) in any case where a relevant notice taking account of such a determination as is mentioned in sub-paragraph (4)(b) above has been given to the advantaged person, the period of two years beginning with the day on which that notice was given.

(6) Subject to section 111(3)(b) of the Finance Act 1998, where—

(a) a claim for the purposes of this paragraph is made by the disadvantaged person in relation to a return made on the basis mentioned in sub-paragraph (3)(a) above, and

(b) a relevant notice taking account of such a determination as is mentioned in sub-paragraph (4)(b) above is subsequently given to the advantaged person,

the disadvantaged person shall be entitled, within the period mentioned in sub-paragraph (5)(b) above, to make any such amendment of the claim as may be appropriate in consequence of the determination contained in that notice.

(7) In this paragraph—

• “relevant notice” means—

  (a)

  [F7 a closure notice under section 28A(1) or 28B(1) of the Management Act in relation to an enquiry into a return under section 8 or 8A of that Act or into a partnership return;

  (b)

  a closure notice under paragraph 32 of Schedule 18 to the Finance Act 1998 in relation to an enquiry into a company tax return;

  (c)

  a notice of an assessment under section 29 of the Management Act;

  (d)

  a notice of any discovery assessment or discovery determination under paragraph 41 of Schedule 18 to the Finance Act 1998 (including any notice of an assessment by virtue of paragraph 52 of that Schedule);

  (e)

  a notice under section 30B(1) of the Management Act amending a [F8 partnership return];

• “return” means any return required to be made under the Management Act or Schedule 18 to the Finance Act 1998 for income tax or corporation tax purposes or any voluntary amendment of such a return; and

• “voluntary amendment”, in relation to a return, means [F9 —

  (a)

  an amendment under section 9ZA or 12ABA of the Management Act (amendment of personal, trustee or partnership return by taxpayer), or

  (b)

  an amendment under Schedule 18 to the Finance Act 1998 other than one made in response to the giving of a relevant notice.]]

Textual Amendments

F1 Sch. 28AA para. 6(1) substituted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), s. 30(4)

F2 Word in Sch. 28AA para. 6(2) substituted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), s. 30(5)(a)(i)

F3 Words in Sch. 28AA para. 6(2) inserted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), s. 35(2)

F4 Words in Sch. 28AA para. 6(2) inserted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), s. 30(5)(a)(ii)

F5 Words in Sch. 28AA para. 6(2)(a) substituted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), s. 30(5)(b)

F6 Sch. 28AA para. 6(4A)-(4C) inserted (with effect in accordance with Sch. 8 para. 4 of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 8 para. 1(5)

F7 Sch. 28AA para. 6(7): in definition of "relevant notice", para. (a) substituted (with effect in accordance with s. 88(3) of the amending Act) by Finance Act 2001 (c. 9), Sch. 29 para. 35(3)(a)

F8 Sch. 28AA para. 6(7): in definition of "relevant notice", words in para. (e) substituted (with effect in accordance with s. 88(3) of the amending Act) by Finance Act 2001 (c. 9), Sch. 29 para. 35(3)(b)

F9 Sch. 28AA para. 6(7): in definition of "voluntary amendment", paras. (a)(b) substituted for words (with effect in accordance with s. 88(3) of the amending Act) by Finance Act 2001 (c. 9), Sch. 29 para. 35(4)

Modifications etc. (not altering text)

C1 Sch. 28AA paras. 6, 7 modified (27.7.1999) by Finance Act 1999 (c. 16), s. 87(1)-(3) (with s. 87(4))