(1)This section applies if—
(a)apart from this section, section 758 would apply in relation to a payment of interest or of a royalty,
(b)at the time the payment is made there is a special relationship (within the meaning of Article 4(2) of the Directive)—
(i)between the company in condition A of section 758 and the company in condition B of that section, or
(ii)between one of those companies and another person, and
(c)owing to the special relationship, the amount of the payment exceeds the amount which would have been paid in the absence of the relationship (“the arm's length amount”).
(2)Sections 757 to 767, apart from this section and section 764, have effect in relation to only so much of the payment as does not exceed the arm's length amount (which may be nil).
(3)Nothing in this section or section 764 affects any relief which may be allowed under any arrangements having effect under section 788 of ICTA (double taxation relief by agreement with other territories).