Finance Act 1999

85 Advance pricing agreements etc. U.K.

(1) This section applies in relation to any chargeable period where—

(a) the Board have made a written agreement with any person (“the taxpayer”);

(b) the agreement relates to one or more of the matters mentioned in subsection (2) below and to that chargeable period;

(c) the agreement is one made as a consequence of an application by the taxpayer to the Board for the clarification by agreement of the effect in the taxpayer’s case of provisions by reference to which questions relating to any one or more of those matters fall, or might fall, to be determined; and

(d) the agreement contains a declaration that it is an agreement made for the purposes of this section.

(2) Those matters are—

(a) the attribution of income to a branch or agency through which the taxpayer has been carrying on a trade in the United Kingdom, or is proposing so to carry on a trade;

(b) the attribution of income to any permanent establishment of the taxpayer (wherever situated) through which he has been carrying on, or is proposing to carry on, any business;

(c) the extent to which income which has arisen or may arise to the taxpayer is to be taken for any purpose to be income arising in a country or territory outside the United Kingdom;

(d) the treatment for tax purposes of any provision made or imposed (whether before or after the date of the agreement) as between the taxpayer and any associate of his;

(e) the treatment for tax purposes of any provision made or imposed (whether before or after the date of the agreement) as between a ring fence trade carried on by the taxpayer and any other activities so carried on.

(3) Subject to the following provisions of this section and to section 86 below, the Tax Acts shall have effect in the taxpayer’s case as if questions relating to the matters mentioned in subsection (2) above were, to the extent provided for in the agreement, to be determined in accordance with the agreement, and without reference to the provisions in accordance with which they would otherwise have fallen to be determined.

(4) In the case of so much of any question as—

(a) relates to any matter mentioned in paragraph (d) or (e) of subsection (2) above, and

(b) is not comprised in a question falling within another paragraph of that subsection,

the provisions reference to which is capable of being excluded under subsection (3) above by an agreement made for the purposes of this section shall be confined to those contained in Schedule 28AA to the Taxes Act 1988 (transfer pricing rules).

(5) Any such application to the Board as is mentioned in subsection (1)(c) above must set out—

(a) the taxpayer’s understanding of what would, in his case, be the effect, in the absence of any agreement, of the provisions in relation to which clarification is sought;

(b) the respects in which it appears to the taxpayer that clarification is required in relation to those provisions; and

(c) how the taxpayer proposes that matters should be clarified in a manner consistent with the understanding mentioned in paragraph (a) above.

(6) For the purposes of this section two persons are associates, in relation to provision made or imposed as between them if, within the meaning of Schedule 28AA to the Taxes Act 1988—

(a) one of them is directly or indirectly participating, at the time of the making or imposition of the provision, in the management, control or capital of the other; or

(b) the same person or persons is or are, at that time, directly or indirectly participating in the management, control or capital of each of the two persons;

and, in the case of provision made or imposed by or in relation to the terms of any sale of oil (within the meaning of paragraph 9 of that Schedule), two persons shall also be treated as associates for the purposes of this section wherever sub-paragraph (2) of that paragraph would require them for the purposes of that Schedule to be treated in relation to that provision as falling within paragraph (b) above.

(7) In this section “ring fence trade”, in relation to the taxpayer, means any activities which—

(a) are carried on by the taxpayer as, or as part of, a trade; and

(b) in accordance with section 492(1) of the Taxes Act 1988 (tax treatment of oil extraction activities) [F1 or section 16(1) of the Income Tax (Trading and Other Income) Act 2005], either—

(i) fall to be treated for tax purposes as a separate trade, distinct from all other activities carried on by the taxpayer; or

(ii) would so fall if the taxpayer did carry on any other activities as part of that trade.

(8) This section applies in relation to any chargeable period ending on or after the day on which this Act is passed but only if the agreement is one made on or after that day and in relation to that period.

Textual Amendments

F1 Words in s. 85(7)(b) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 508 (with Sch. 2)

Modifications etc. (not altering text)

C1 S. 85(2)(a) modified (with effect in accordance with s. 153(4) of the amending Act) by Finance Act 2003 (c. 14), s. 153(2)(c)