Taxation (International and Other Provisions) Act 2010

Part 4 U.K. Transfer pricing

Modifications etc. (not altering text)

C1 Pt. 4 excluded by 2010 c. 4, s. 938N (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)

C2 Pt. 4 excluded (1.10.2011) by Postal Services Act 2011 (c. 5), s. 93(2)(3), Sch. 2 para. 6(2); S.I. 2011/2329, art. 3

C3 Pt. 4 excluded (1.4.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), s. 29, Sch. 4 para. 3(2); S.I. 2011/2576, art. 5

C4 Pt. 4 excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 129(11) (with s. 147, Sch. 17)

CHAPTER 1 U.K. Basic transfer-pricing rule

Modifications etc. (not altering text)

C5 Pt. 4 Chs. 1 and 3-6 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 9 paras. 3, 4

146 Application of this Part U.K.

This Part applies for—

(a) corporation tax purposes, and

(b) income tax purposes.

147 Tax calculations to be based on arm's length, not actual, provision U.K.

(1) For the purposes of this section “the basic pre-condition” is that—

(a) provision (“the actual provision”) has been made or imposed as between any two persons (“the affected persons”) by means of a transaction or series of transactions,

(b) the participation condition is met (see section 148),

(c) the actual provision is not within subsection (7) (oil transactions), and

(d) the actual provision differs from the provision (“the arm's length provision”) which would have been made as between independent enterprises.

(2) Subsection (3) applies if—

(a) the basic pre-condition is met, and

(b) the actual provision confers a potential advantage in relation to United Kingdom taxation on one of the affected persons.

(3) The profits and losses of the potentially advantaged person are to be calculated for tax purposes as if the arm's length provision had been made or imposed instead of the actual provision.

(4) Subsection (5) applies if—

(a) the basic pre-condition is met, and

(b) the actual provision confers a potential advantage in relation to United Kingdom taxation (whether or not the same advantage) on each of the affected persons.

(5) The profits and losses of each of the affected persons are to be calculated for tax purposes as if the arm's length provision had been made or imposed instead of the actual provision.

(6) Subsections (3) and (5) have effect subject to—

(a) section 165 (exemption for dormant companies),

(b) section 166 (exemption for small and medium-sized enterprises),

[F1 (bza) section 173A,]

[F2 (ba) section 206A (modification of basic rule where allowances restricted for certain oil-related expenditure),]

(c) section 213 (this Part generally does not affect calculation of capital allowances),

(d) section 214 (this Part generally does not affect calculation of chargeable gains),

F3 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F5 (g) section 938N of CTA 2010 (this Part treated as of no effect for the purposes of Part 21B of CTA 2010 (group mismatch schemes)).]

(7) The actual provision is within this subsection if it is made or imposed by means of any transaction or deemed transaction in the case of which the price or consideration is determined in accordance with any of sections 225F to 225J of ITTOIA 2005 or any of sections 281 to 285 of CTA 2010 (transactions and deemed transactions involving oil treated as made at market value).

Textual Amendments

F1 S. 147(6)(bza) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 29(1)(a), 32(1) (with Sch. 6 para. 32(3))

F2 S. 147(6)(ba) inserted (with effect in accordance with Sch. 32 para. 16 of the amending Act) by Finance Act 2013 (c. 29), Sch. 32 para. 13

F3 S. 147(6)(e) omitted (for chargeable periods commencing on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 29(1)(b), 32(1) (with Sch. 6 para. 32(3))

F4 S. 147(6)(f) omitted (for chargeable periods commencing on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 29(1)(b), 32(1) (with Sch. 6 para. 32(3))

F5 S. 147(6)(g) and word inserted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 5 para. 5(1)

148 The “participation condition” U.K.

(1) For the purposes of section 147(1)(b), the participation condition is met if—

(a) condition A is met in relation to the actual provision so far as the actual provision is provision relating to financing arrangements, and

(b) condition B is met in relation to the actual provision so far as the actual provision is not provision relating to financing arrangements.

(2) Condition A is that, at the time of the making or imposition of the actual provision or within the period of six months beginning with the day on which the actual provision was made or imposed—

(a) one of the affected persons was directly or indirectly participating in the management, control or capital of the other, or

(b) the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons.

(3) Condition B is that, at the time of the making or imposition of the actual provision—

(a) one of the affected persons was directly or indirectly participating in the management, control or capital of the other, or

(b) the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons.

(4) In this section “financing arrangements” means arrangements made for providing or guaranteeing, or otherwise in connection with, any debt, capital or other form of finance.

(5) For the interpretation of subsections (2) and (3) see sections 157 to 163.

Modifications etc. (not altering text)

C6 S. 148 applied by 2009 c. 4, s. 161(3A) (as inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 124(6) (with Sch. 9 paras. 1-9, 22))

C7 S. 148 applied by 2005 c. 5, s. 172F(2B) (as inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 121(6) (with Sch. 9 paras. 1-9, 22))

C8 S. 148 applied by 2009 c. 4, s. 445(3A) (as inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 133(8) (with Sch. 9 paras. 1-9, 22))

C9 S. 148 applied by 2009 c. 4, s. 846(2A) (as inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 147(6) (with Sch. 9 paras. 1-9, 22))

C10 S. 148 applied (with modifications) by 2007 c. 3, s. 917A(6) (as inserted (with effect in accordance with s. 41(2) of the amending Act) by Finance Act 2016 (c. 24), s. 41(1))

C11 S. 148 applied by 2010 c. 8, s. 882(5D) (as inserted (with effect in accordance with s. 52(5) of the amending Act) by Finance Act 2016 (c. 24), s. 52(2))

C12 S. 148 applied by 2009 c. 4, s. 845(4C) (as inserted (with effect in accordance with s. 53(2) of the amending Act) by Finance Act 2016 (c. 24), s. 53(1))

C13 S. 148 applied by 2009 c. 4, s. 849AB(9) (as inserted (with application in accordance with s. 21(3) of the amending Act) by Finance Act 2018 (c. 3), s. 21(2))

C14 S. 148 applied by 2009 c. 4, s. 879E(7) (as inserted (with effect in accordance with Sch. 9 para. 7 of the amending Act) by Finance Act 2019 (c. 1), Sch. 9 para. 6)

C15 S. 148 applied by 2009 c. 4, s. 90H(4) (as inserted (with effect in accordance with s. 31(14)(15) of the amending Act) by Finance Act 2020 (c. 14), s. 31(13))

[F6 148A Participation condition treated as met: transfer pricing notice U.K.

(1) Subsection (3) applies where—

(a) the basic pre-condition would be met, if the participation condition in section 148 were met,

(b) as a result of the application of sections 157 to 161, the participation condition is not met, and

(c) either (ignoring those sections, which give particular meanings to the following words for the purposes of section 148)—

(i) one of the affected persons was, at the time of the making or imposition of the actual provision, directly or indirectly participating in the management, control or capital of the other, or

(ii) the same person or persons was or were, at that time, directly or indirectly participating in the management, control or capital of each of the affected persons.

(2) Whether a person was directly or indirectly participating in the management, control or capital of another person is, for the purposes of subsection (1)(c), to be determined having regard to all of the circumstances.

(3) The Commissioners for His Majesty's Revenue and Customs may give the potentially advantaged person a notice under this section.

(4) The effect of the notice is that the participation condition is to be treated as met for the purposes of applying this Part in relation to the chargeable period in which it is given and subsequent chargeable periods.

(5) Where the Commissioners consider that a particular case is analogous to a case that would meet the participation condition only as a result of section 161 (actual provision relates, to any extent, to financing arrangements)—

(a) the Commissioners must state that in the notice, and

(b) subsections (1)(d), (2)(b), (3), (4)(b) and (5) of section 147 have effect in relation to that case as if reference to “the actual provision” were to the actual provision so far as relating to the financing arrangements concerned.

(6) A notice under subsection (3) is referred to in Chapter 3 as a transfer pricing notice.

(7) Sections 169 to 171 in that Chapter make general provision about the giving of, and effect of, transfer pricing notices.

(8) But neither section 169(3) (no transfer pricing notice before notice of enquiry given) nor section 171 (tax returns where transfer pricing notice given) applies to a transfer pricing notice under this section.]

Textual Amendments

F6 S. 148A inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 2(1), 32(1)

CHAPTER 2 U.K. Key interpretative provisions

Meaning of certain expressions that first appear in section 147 U.K.

149 “Actual provision” and “affected persons” U.K.

(1) In this Part—

• “the actual provision”, and

• “the affected persons”,

have the meaning given by section 147(1).

(2) Subsection (1) does not apply if Chapters 1 and 3 to 6 apply in accordance with section 205(2) to (4) (oil-related ring-fence trades) but, in that event, in this Part—

• “the actual provision” means the provision mentioned in section 205(1)(b), and

• “the affected persons” means the two persons mentioned in section 205(2).

(3) Subsections (1) and (2) are subject to subsection (4).

(4) If the participation condition (see section 148) would not be met but for section 161 or 162 (cases in which actual provision relates, to any extent, to financing arrangements), then in section 147(1)(d), (2)(b), (3), (4)(b) and (5) “the actual provision” is a reference to the actual provision so far as relating to the financing arrangements concerned.

150 “Transaction” and “series of transactions” U.K.

(1) In this Part “transaction” includes arrangements, understandings and mutual practices (whether or not they are, or are intended to be, legally enforceable).

(2) References in this Part to a series of transactions include references to a number of transactions each entered into (whether or not one after the other) in pursuance of, or in relation to, the same arrangement.

(3) A series of transactions is not prevented by reason only of one or more of the matters mentioned in subsection (4) from being regarded for the purposes of this Part as a series of transactions by means of which provision has been made or imposed as between any two persons.

(4) Those matters are—

(a) that there is no transaction in the series to which both those persons are parties,

(b) that the parties to any arrangement in pursuance of which the transactions in the series are entered into do not include one or both of those persons, and

(c) that there is one or more transactions in the series to which neither of those persons is a party.

(5) In this section “arrangement” means any scheme or arrangement of any kind (whether or not it is, or is intended to be, legally enforceable).

151 “Arm's length provision” U.K.

(1) In this Part “the arm's length provision” has the meaning given by section 147(1).

(2) For the purposes of this Part, the cases in which provision made or imposed as between any two persons is to be taken to differ from the provision that would have been made as between independent enterprises include the case in which provision is made or imposed as between two persons but no provision would have been made as between independent enterprises; and references in this Part to the arm's length provision are to be read accordingly.

[F7 (3) For the purposes of determining the arm’s length provision in relation to the actual provision involving—

(a) the transfer of intangible fixed assets for consideration other than money, or

(b) the grant of a licence or any other right in respect of intangible fixed assets for consideration other than money,

assume that the transfer or grant at arm’s length would be for consideration of a sum of money.

(4) For the purposes of subsection (3) “intangible fixed assets” has the meaning it has in Part 8 of CTA 2009.]

Textual Amendments

F7 S. 151(3)(4) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 3, 32(1)

F8 152 Arm's length provision where actual provision relates to securities U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F8 S. 152 omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 4(1), 12

F9 153 Arm's length provision where security issued and guarantee given U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F9 S. 153 omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 4(2), 12

[F10 153A Certain guarantees not capable of being arm’s length U.K.

Where—

(a) the actual provision includes provision for the borrowing of an amount,

(b) the amount would not have been lent between independent enterprises but for a guarantee, and

(c) such a guarantee was provided by a person with whom the borrower has a participatory relationship,

provision for the guarantee (to the extent it relates to the borrowing of that amount) is never to be regarded as arm’s length provision for the purposes of this Part.]

Textual Amendments

F10 S. 153A inserted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(3), 12

[F11 153B Election for deemed guarantee U.K.

(1) This section applies where the actual provision includes provision for the borrowing of an amount.

(2) A UK resident company (“the deemed guarantor”) with whom the borrower has a qualifying participatory relationship may elect to be treated, in relation to that borrowing—

(a) for the purposes of this Part (as it applies to the deemed guarantor, the borrower and any other person), and

(b) while the deemed guarantor is UK resident and has that relationship,

as having provided a guarantee in respect of so much of the borrowing as is excessive.

(3) Borrowing is excessive to the extent that it—

(a) would not have been lent between independent enterprises but for a guarantee, and

(b) was not the subject of such a guarantee.

(4) The election—

(a) applies at all times when the condition in subsection (2)(b) is met, from the beginning of the day on which the first chargeable period of the borrower for which the election is made commences, and

(b) is irrevocable (so continues indefinitely).

(5) The election—

(a) must specify the first chargeable period of the borrower for which the election is made,

(b) may not be made more than 4 years after the end of that period.

(6) Where the borrower is the subject of a discovery assessment in relation to a chargeable period of the borrower, the deemed guarantor may make an election for that period to be the first chargeable period of the borrower for which the election is made (despite subsection (5)(b)) at any time within the period of one year beginning with the making of that discovery assessment.

(7) Nothing in this section is to be taken as permitting the amendment of a return, or the making of any claim or election, in consequence of an election made under this section after the time for which that amendment, claim or other election could otherwise be made.

(8) Where the lender makes a claim under section 174 or a guarantor makes a claim under section 192 in relation to the provision for the borrowing before the election made under this section, the election only applies to so much of the excessive borrowing as is not taken account of in the calculation of that person’s profits and losses as a result of the claim.

(9) For the purposes of this section—

(a) a participatory relationship is “qualifying” if the participatory relationship does not arise only as a result of any of sections 148A (participation condition treated as met following transfer pricing notice) or 159 to 161 (indirect participation);

(b) “discovery assessment” means—

(i) an assessment under section 29(1) of TMA 1970, or

(ii) a discovery assessment or discovery determination under Schedule 18 to FA 1998 (company tax returns).

(10) See also Chapter 5 for provision about claims by a guarantor (which includes a person making an election under subsection (2)).]

Textual Amendments

F11 S. 153B inserted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(4), 12

154 Interpretation of sections [F12 153A and 153B] U.K.

F13 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Any reference to a guarantee includes—

(a) a reference to a surety, and

(b) a reference to any other relationship, arrangements, connection or understanding (whether formal or informal) such that the person making the loan to the [F14 borrower] has a reasonable expectation that in the event of a default by the [F14 borrower] the person will be paid by, or out of the assets of, one or more companies.

[F15 (4A) But any implicit support is not to be regarded as a guarantee.]

[F16 (5) A person has a participatory relationship with another person at any time if provision relating to financing arrangements made or imposed between them at that time would meet the participation condition in section 148.]

[F17 (5A) “Borrowing” includes the issuing of a security.

(5B) “Implicit support” means any incidental benefit, in relation to borrowing by a company, that it is reasonable to assume would arise to the company as a result of it having a participatory relationship with one or more other companies.]

F18 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Words in s. 154 heading substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(a), 12

F13 S. 154(1)-(3) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(b), 12

F14 Word in s. 154(4)(b) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(c), 12

F15 S. 154(4A) inserted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(d), 12

F16 S. 154(5) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(e), 12

F17 S. 154(5A)(5B) inserted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(f), 12

F18 S. 154(6) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(g), 12

F19 S. 154(7) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 4(5)(g), 12

155 “Potential advantage” in relation to United Kingdom taxation U.K.

(1) Subsection (2) applies for the purposes of this Part.

(2) The actual provision confers a potential advantage on a person in relation to United Kingdom taxation wherever, disregarding this Part, the effect of making or imposing the actual provision, instead of the arm's length provision, would be one or both of Effects A and B.

(3) Effect A is that a smaller amount (which may be nil) would be taken for tax purposes to be the amount of the person's profits for any chargeable period.

(4) Effect B is that a larger amount (or, if there would not otherwise have been losses, any amount of more than nil) would be taken for tax purposes to be the amount for any chargeable period of any losses of the person.

(5) In determining for the purposes of subsection (3) or (4) the amount that would be taken for tax purposes to be the amount of the profits or losses for a year of assessment in the case of a non-UK resident, there is to be left out of account any income of that person which is—

(a) disregarded income within the meaning given by section 813 of ITA 2007 (limits on liability to income tax of non-UK residents), or

(b) disregarded company income within the meaning given by section 816 of that Act.

(6) For the purposes of subsections (2) to (4)—

[F20 (a) Part 10 (corporate interest restriction),]

(b) paragraph E of the list in section 1000(1) of CTA 2010 (excessive interest etc treated as a distribution),

are to be disregarded.

Textual Amendments

F20 S. 155(6)(a) substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 14

156 “Losses” and “profits” U.K.

(1) In this Part “losses” includes amounts which are not losses but in respect of which relief may be given in accordance with [F21 the Tax Acts including (for example)]—

(a) section 57 of ITTOIA 2005 (pre-trading expenses),

(b) section 88 of ITA 2007 (carry forward of certain interest),

(c) section 61 of CTA 2009 (pre-trading expenses),

(d) sections 387 to 391 of CTA 2009 (insurance companies: non-trading deficits on loan relationships),

(e) Chapter 16 [F22 or Chapter 16A] of Part 5 of CTA 2009 (non-trading deficits on loan relationships),

(f) section 1223 of CTA 2009 (excess of management expenses), F23 ...

(g) Part 5 of CTA 2010 (group relief) [F24 , or

(h) Part 5A of CTA 2010 (group relief for carried-forward losses).]

(2) In this Part “profits” includes income.

Textual Amendments

F21 Words in s. 156(1) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 17, 32(1)

F22 Words in s. 156(1)(e) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 178(a)

F23 Word in s. 156(1)(f) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 178(b)

F24 S. 156(1)(h) and word inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 178(c)

“Direct participation” in management, control or capital of a person U.K.

157 Direct participation U.K.

(1) Subsection (2) applies for the purposes of—

(a) this Part [F25 (other than for the purposes of section 148A(1)(c))],

(b) in Part 2, section 132(7), F26 ...

(c) in Part 5, section 219(2) [F27 , F28 ...

(d) in Part 6A, section 259NB(4)] [F29 , F30 ... [F31 , and]

(e) in Part 10, section 463(4)]F32 ...

F32 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) A person is directly participating in the management, control or capital of another person at a particular time if (and only if) that other person is at that time—

(a) a body corporate or a firm, and

(b) controlled by the first person.

[F33 (3) See also section 162A, which provides for circumstance in which a person will be regarded as having control of another.]

Textual Amendments

F25 Words in s. 157(1)(a) inserted (18.3.2026 for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 2(2), 32(1)

F26 Word in s. 157(1)(b) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 10 para. 11(a)

F27 S. 157(1)(d) and word inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 10 para. 11(b)

F28 Word in s. 157(1)(c) omitted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 15(a)

F29 S. 157(1)(e) and word inserted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 15(b)

F30 Word in s. 157(1)(d) omitted (with effect in accordance with Sch. 3 para. 7 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 3 para. 6(2)(a)

F31 Word in s. 157(1)(d) inserted (with effect in accordance with s. 20(12) of the amending Act) by Finance Act 2025 (c. 8), s. 20(7)(a)(12)

F32 S. 157(1)(f) and word omitted (with effect in accordance with s. 20(12) of the amending Act) by virtue of Finance Act 2025 (c. 8), s. 20(7)(b)(12)

F33 S. 157(3) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 14(2), 32(1)

Modifications etc. (not altering text)

C16 S. 157(2) applied (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 106(7)(a)

C17 S. 157(2) applied by 2010 c. 4, s. 356OT(7) (as inserted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

C18 S. 157(2) applied by 2007 c. 3, s. 517U(7) (as inserted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

“Indirect participation” in management, control or capital of a person U.K.

158 Indirect participation: defined by sections 159 to [F34 161] U.K.

(1) This section is about how to read the references, in this Part and in some other provisions of this Act, to indirect participation.

(2) For the purposes of sections [F35 148(2) and (3) and 175], a person is indirectly participating in the management, control or capital of another person only if section 159, 160 or 161 so provides.

F36 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) For the purposes of—

(a) sections 154(5) and 204(4),

(b) in Part 2, section 132(7), F37 ...

F38 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [F39 , and

(d) in Part 6A, section 259NB(4),]

a person is indirectly participating in the management, control or capital of another person only if section 159 or 160 so provides.

[F40 (5) For the purposes of section 219(2) (which is in Part 5), a person is indirectly participating in the management, control or capital of another person only if any of sections 159 to 162 so provide.]

Textual Amendments

F34 Word in s. 158 heading substituted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 13(3)(a), 32(1)

F35 Words in s. 158(2) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(9)(a), 12

F36 S. 158(3) omitted (for chargeable periods commencing on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 13(3)(b), 32(1)

F37 Word in s. 158(4)(b) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 10 para. 12(a)

F38 S. 158(4)(c) omitted (retrospectively) by virtue of Finance Act 2025 (c. 8), s. 22(1)(a)(5)

F39 S. 158(4)(d) and word inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 10 para. 12(b)

F40 S. 158(5) inserted (retrospectively) by Finance Act 2025 (c. 8), s. 22(1)(b)(5)

Modifications etc. (not altering text)

C19 Ss. 158-163 applied (with modifications) (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 106(7)(b)

C20 S. 158(4) applied by 2007 c. 3, s. 517U(7) (as inserted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

C21 S. 158(4) applied by 2010 c. 4, s. 356OT(7) (as inserted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

159 Indirect participation: potential direct participant U.K.

(1) Subsection (2) applies for the purposes of—

(a) sections 148(2) and (3), 154(5), [F41 175] and 204(4),

(b) in Part 2, section 132(7), F42 ...

(c) in Part 5, section 219(2) [F43 , F44 ...

(d) in Part 6A, section 259NB(4)] [F45 , F46 ... [F47 , and]

(e) in Part 10, section 463(4)], F48 ...

F48 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) A person (“P”) is indirectly participating in the management, control or capital of another person (“A”) at a particular time if P would be directly participating in the management, control or capital of A at that time if the rights and powers attributed to P included all the rights and powers mentioned in subsection (3) that are not already attributed to P for the purpose of deciding under section 157 whether P is directly participating in the management, control or capital of A.

(3) The rights and powers referred to in subsection (2) are—

(a) rights and powers which P is entitled to acquire at a future date,

(b) rights and powers which P will, at a future date, become entitled to acquire,

(c) rights and powers of persons other than P so far as they are rights or powers falling within subsection (4),

(d) rights and powers of any person with whom P is connected (see section 163), and

(e) rights and powers which would be attributed by subsection (2) to a person with whom P is connected were it being decided under that subsection whether that connected person is indirectly participating in the management, control or capital of A.

(4) Rights and powers fall within this subsection so far as they—

(a) are required, or may be required, to be exercised in any one or more of the following ways—

(i) on behalf of P,

(ii) under the direction of P, or

(iii) for the benefit of P, and

(b) are not confined, in a case where a loan has been made by one person to another, to rights and powers conferred in relation to property of the borrower by the terms of any security relating to the loan.

(5) In subsections (3)(c) to (e) and (4), the references to a person's rights and powers include references to any rights or powers which the person either—

(a) is entitled to acquire at a future date, or

(b) will, at a future date, become entitled to acquire.

(6) In paragraph (e) of subsection (3), the reference to rights and powers which would be attributed to a connected person includes a reference to rights and powers which, by applying that paragraph wherever one person is connected with another, would be so attributed to the connected person through a number of persons each of whom is connected with at least one of the others.

(7) References in this section—

(a) to rights and powers of a person, or

(b) to rights and powers which a person is or will become entitled to acquire,

include references to rights or powers which are exercisable by that person, or (when acquired by that person) will be exercisable, only jointly with one or more other persons.

Textual Amendments

F41 Word in s. 159(1)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(9)(b), 12

F42 Word in s. 159(1)(b) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 10 para. 13(a)

F43 S. 159(1)(d) and word inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 10 para. 13(b)

F44 Word in s. 159(1)(c) omitted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 16(a)

F45 S. 159(1)(e) and word inserted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 16(b)

F46 Word in s. 159(1)(d) omitted (with effect in accordance with Sch. 3 para. 7 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 3 para. 6(3)(a)

F47 Word in s. 159(1)(d) inserted (with effect in accordance with s. 20(12) of the amending Act) by Finance Act 2025 (c. 8), s. 20(8)(a)(12)

F48 S. 159(1)(f) and word omitted (with effect in accordance with s. 20(12) of the amending Act) by virtue of Finance Act 2025 (c. 8), s. 20(8)(b)(12)

Modifications etc. (not altering text)

C19 Ss. 158-163 applied (with modifications) (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 106(7)(b)

C22 S. 159(2) applied by 2010 c. 4, s. 356OT(7) (as inserted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

C23 S. 159(2) applied by 2007 c. 3, s. 517U(7) (as inserted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

160 Indirect participation: one of several major participants U.K.

(1) Subsection (2) applies for the purposes of—

(a) sections 148(2) and (3), 154(5), [F49 175] and 204(4),

(b) in Part 2, section 132(7), F50 ...

(c) in Part 5, section 219(2) [F51 , F52 ...

(d) in Part 6A, section 259NB(4)] [F53 , F54 ...

(e) in Part 10, section 463(4)]F55 ...

F55 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) A person is indirectly participating in the management, control or capital of another person at a particular time if the first person is, at that time, one of a number of major participants in that other person's enterprise.

(3) For the purposes of this section, a person (“A”) is a major participant in another person's enterprise at a particular time if at that time—

(a) that other person (“the subordinate”) is a body corporate or firm, and

(b) the 40% test is met in the case of each of two persons—

(i) who, taken together, control the subordinate, and

(ii) of whom one is A.

(4) For the purposes of this section, the 40% test is met in the case of each of two persons wherever each of them has interests, rights and powers representing at least 40% of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the subordinate.

(5) For the purposes of this section—

(a) the question whether a person is controlled by any two or more persons taken together, and

(b) any question whether the 40% test is met in the case of a person who is one of two persons,

is to be determined after attributing to each of the persons all the rights and powers which would be attributed by section 159(2) to a person were it being decided under section 159(2) whether that person is indirectly participating in the management, control or capital of another person.

(6) References in this section—

(a) to rights and powers of a person, or

(b) to rights and powers which a person is or will become entitled to acquire,

include references to rights or powers which are exercisable by that person, or (when acquired by that person) will be exercisable, only jointly with one or more other persons.

Textual Amendments

F49 Word in s. 160(1)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(9)(c), 12

F50 Word in s. 160(1)(b) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 10 para. 14(a)

F51 S. 160(1)(d) and word inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 10 para. 14(b)

F52 Word in s. 160(1)(c) omitted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 17(a)

F53 S. 160(1)(e) and word inserted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 17(b)

F54 Word in s. 160(1)(d) omitted (with effect in accordance with Sch. 3 para. 7 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 3 para. 6(4)(a)

F55 S. 160(1)(f) and word omitted (with effect in accordance with s. 20(12) of the amending Act) by virtue of Finance Act 2025 (c. 8), s. 20(9)(12)

Modifications etc. (not altering text)

C19 Ss. 158-163 applied (with modifications) (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 106(7)(b)

C24 S. 160(2) applied by 2007 c. 3, s. 517U(7) (as inserted (with effect in accordance with s. 82 of the amending Act) by Finance Act 2016 (c. 24), s. 79(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

C25 S. 160(2) applied by 2010 c. 4, s. 356OT(7) (as inserted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 77(1) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2)))

[F56 161 Indirect participation: involvement in financing arrangements U.K.

(1) At any time this subsection applies, a person (“P”), with a qualifying interest in a body corporate or firm (“A”) is to be regarded as indirectly participating in the management, control or capital of A for the purposes of applying any of—

(a) section 148(2) or (3) (participation condition),

(b) section 175 (application of section 174 where guarantee disallowed), or

(c) section 219(2) (in Part 5),

in relation to provision comprising financing arrangements for A to which P and one or more other persons with a qualifying interest in A are party.

(2) Subsection (1) applies at any time if—

(a) one or more of those other persons act together (within the meaning given by subsection (4)) with P in relation to A, or have acted together in relation to A within the previous 6 months, and

(b) if all of the rights and powers of P and each of the persons mentioned in paragraph (a) were held by one person (“H”), that person would be taken to have control of A.

(3) In determining whether H would be taken to have control of A, the rights and powers of any person (and not just H) are to be taken to include those that would be attributed to that person by section 159(2) were it being decided under section 159(2) whether that person is indirectly participating in the management, control or capital of A.

(4) A person (“Q”) with a qualifying interest in another person (“B”), and another person (“U”) with such an interest, are to be regarded as acting together in relation to B if at any time while they both hold such an interest—

(a) Q and U are connected (within the meaning of section 163),

(b) for the purposes of influencing the conduct of B’s affairs—

(i) Q is able to secure that U acts in accordance with Q's wishes,

(ii) U can reasonably be expected to act, or typically acts, in accordance with Q's wishes,

(iii) U is able to secure that Q acts in accordance with U's wishes, or

(iv) Q can reasonably be expected to act, or typically acts, in accordance with U's wishes, or

(c) Q and U are party to any financing arrangements for B to which Q and U are party that—

(i) it is reasonable to suppose is designed to affect the value of any of U's or Q’s rights or interests in relation to B, or

(ii) relates to the exercise of any of U's or Q’s rights in relation to B.

(5) But for the purposes of subsection (4), ignore any rights or powers of Q that only arise as a result of loan made by Q and that are conferred in relation to property of U by the terms of any security relating to the loan.

(6) A person (“R”) has a qualifying interest in a company (“C”) if it is reasonable to suppose that—

(a) R possesses, or is entitled to acquire, any amount of the share capital or issued share capital of C,

(b) R possesses, or is entitled to acquire, any amount of the voting power in C, or

(c) if the whole of C's share capital were disposed of, R would receive (directly or indirectly and whether at the time of disposal or later) any amount of the proceeds of the disposal, other than as a result only of the terms of a normal commercial loan under which R is the creditor of C.

(7) A person (“R”) has an qualifying interest in a firm (“F”) if it is reasonable to suppose that, other than as a result only of the terms of a normal commercial loan under which R is the creditor of F—

(a) if the whole of the income of the firm were distributed, R would receive (directly or indirectly and whether at the time of the distribution or later) any amount of the distributed amount, or

(b) in the event of a winding-up of the firm or in any other circumstances, R would receive (directly or indirectly and whether or not at the time of the winding-up or other circumstances or later) any amount of F's assets which would then be available for distribution.

(8) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable;

• “financing arrangements” means arrangements made for providing or guaranteeing, or otherwise in connection with, any debt, capital or other form of finance;

• “normal commercial loan” means a loan which is a normal commercial loan for the purposes of section 158(1)(b) or 159(4)(b) of CTA 2010.]

Textual Amendments

F56 S. 161 substituted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 13(1), 32(1)

Modifications etc. (not altering text)

C19 Ss. 158-163 applied (with modifications) (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 106(7)(b)

F58 162 Indirect participation: sections 148 [F57 , 175 and 219(2)]: further financing cases U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F57 Words in s. 162 heading substituted (retrospectively) by Finance Act 2025 (c. 8), s. 22(3)(b)(5)

F58 S. 162 omitted (for chargeable periods commencing on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 13(2), 32(1)

Modifications etc. (not altering text)

C19 Ss. 158-163 applied (with modifications) (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 106(7)(b)

[F59 162A Agreements for common management U.K.

(1) Where a person (“A”) and another person (“B”) are the subject of common management arrangements, each of A and B is to be treated, for the purposes of this Chapter, as having control of the other.

(2) Common management arrangements means arrangements that—

(a) result in the management of A and B by the same person or group of persons, and

(b) include a mechanism that it is reasonable to suppose is intended to secure that the economic interests of shareholders in A and B being aligned.

(3) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable.]

Textual Amendments

F59 S. 162A inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 14(1), 32(1)

[F60 162B Arrangements to avoid participation condition U.K.

(1) Any arrangements that would result in the participation condition not being met are to be disregarded if the main purpose, or one of the main purposes, of the arrangements is to secure that the participation condition is not met.

(2) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable.]

Textual Amendments

F60 S. 162B inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 15, 32(1)

163 Meaning of “connected” in [F61 sections 159 and 161] U.K.

(1) Subsections (2) and (3) apply for the purposes of [F62 sections 159 and 161] and this section.

(2) Two persons are connected with each other if one of them is an individual and the other is—

(a) the individual's spouse or civil partner,

(b) a relative of the individual,

(c) a relative of the individual's spouse or civil partner, or

(d) the spouse, or civil partner, of a person within paragraph (b) or (c).

(3) Two persons are connected with each other if one of them is a trustee of a settlement and the other is—

(a) a person who in relation to that settlement is a settlor, or

(b) a person who is connected with a person within paragraph (a).

(4) In this section—

• “relative” means brother, sister, ancestor or lineal descendant, and

• “settlement” and “settlor” have the same meaning as in section 620 of ITTOIA 2005.

Textual Amendments

F61 Words in s. 163 heading substituted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 13(4)(a), 32(1)

F62 Words in s. 163(1) substituted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 13(4)(b), 32(1)

Modifications etc. (not altering text)

C19 Ss. 158-163 applied (with modifications) (with effect in accordance with s. 116(1) of the amending Act) by Finance Act 2015 (c. 11), s. 106(7)(b)

Application of OECD principles U.K.

164 Part to be interpreted in accordance with OECD principles U.K.

(1) This Part is to be read in such manner as best secures consistency between—

(a) the effect given to sections 147(1)(a), (b) and (d) and (2) to (6), 148 [F63 , 148A] [F64 , 154(5B)] and 151(2), and

[F65 (b) the effect that would be given under double taxation arrangements that incorporate the OECD model in accordance with the transfer pricing guidelines.]

(2) Subsection (1) has effect subject to—

• section 147(1)(c) and (7) (oil-related provision to which Part does not apply),

• sections 205 and 206 (rules for oil-related ring-fence trades), [F66 and]

• section 217(3) to (7) (provision for sales of oil),

• F67 ...

• .

[F68 (3) In this section “the OECD model” means the rules contained in Article 9 of the Model Tax Convention on Income and on Capital approved by the OECD Council on 18 November 2025, as interpreted in accordance with, or supplemented by, the OECD’s commentary on that Article, also approved on that date.

(4) In this section “the transfer pricing guidelines” means the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022 published by the OECD on 20th January 2022 as interpreted in accordance with, or supplemented by, such documents as may be published by the OECD from time to time as are relevant to the application of those guidelines.

(4A) The reference to the Model Tax Convention approved on 18 November 2025, the OECD commentary approved on that date or the OECD Transfer Pricing Guidelines published on 20th January 2022, is to that document as it may be amended or replaced from time to time.

(4B) And each of those documents, and any other document referred to in subsection (4), is to be read in accordance with any reservation, declaration or election made by the United Kingdom in relation to that document.

(4C) The Treasury may by regulations make provision—

(a) for subsection (4A) not to apply in relation to any specified amendment or replacement of the OECD model or the OECD Transfer Pricing Guidelines,

(b) providing that the reference in subsection (4) to other documents is not to include any specified document, and

(c) about the effect of any provision of any document referred to in subsection (4) that has been published, amended or replaced on or after 26 November 2025 where that provision is elective (however expressed).]

[F69 (4) In this section “the transfer pricing guidelines” means—

(a) the version of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations approved by the Organisation for Economic Co-operation and Development (OECD) on 22 July 2010 [F70 as revised by the report, Aligning Transfer Pricing Outcomes with Value Creation, Actions 8-10 - 2015 Final Reports, published by the OECD on 5 October 2015] , or

(b) such other document approved and published by the OECD in place of that (or a later) version or in place of those Guidelines as is designated for the time being by order made by the Treasury,

including, in either case, [F71 material which is ] published by the OECD as part of (or by way of update or supplement to) the version or other document concerned [F72 and which is designated for the time being by order made by the Treasury] .]

(5) In this section “double taxation arrangements” means arrangements that have effect under section 2(1) (double taxation relief by agreement with territories outside the United Kingdom).

Textual Amendments

F63 Word in s. 164(1)(a) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 2(3), 32(1)

F64 Words in s. 164(1)(a) inserted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(6), 12

F65 S. 164(1)(b) substituted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 18(a), 32(1)

F66 Word in s. 164(2) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 30(4)(c)(i), 32(1) (with Sch. 6 para. 32(3))

F67 Words in s. 164(2) omitted (for chargeable periods commencing on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 30(4)(c)(ii), 32(1) (with Sch. 6 para. 32(3))

F68 S. 164(3)-(4C) substituted for s. 164(3) (18.3.2026 for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 18(b), 32(1)

F69 S. 164(4) substituted (with effect in accordance with s. 58(2) of the amending Act) by Finance Act 2011 (c. 11), s. 58(1)

F70 Words in s. 164(4)(a) inserted (with effect in accordance with s. 75(3) of the amending Act) by Finance Act 2016 (c. 24), s. 75(1)(a)

F71 Words in s. 164(4) substituted (with effect in accordance with s. 75(3) of the amending Act) by Finance Act 2016 (c. 24), s. 75(1)(b)(i)

F72 Words in s. 164(4) substituted (with effect in accordance with s. 75(3) of the amending Act) by Finance Act 2016 (c. 24), s. 75(1)(b)(ii)

CHAPTER 3 U.K. Exemptions from basic rule

[F73 164A UK to UK Exemption U.K.

(1) Section 147(3) and (5) do not apply in calculating, for a chargeable period of a potentially advantaged person, the profits and losses of that person in relation to actual provision that is qualifying UK to UK provision in relation to that person for that period.

(2) Actual provision is qualifying UK to UK provision in relation to a potentially advantaged person for a chargeable period of that person (“the relevant period”) if—

(a) the potentially advantaged person and the other affected person (whether or not also a potentially advantaged person) are both companies and are UK resident throughout the relevant period,

(b) the provision is relevant to the calculation of the profits and losses of both companies, and throughout the relevant period, any profits (if there are any) arising are chargeable to corporation tax,

(c) each company is charged to corporation tax on such profits at the same rate as the other company is charged on such profits,

(d) there is no time in the relevant period at which the reference currency used by one company in relation to the provision or a part of the provision differs from the reference currency used by the other in relation to the provision or that part,

(e) the actual provision does not comprise or include, a contract to which section 589 of CTA 2009 (contracts not derivative contracts because of underlying subject matter) applies in relation to one or other of the affected persons (but not both),

(f) no exemption adjustments under section 18A(1) of CTA 2009 (exemption for profits or losses of foreign permanent establishments) are made in respect of profits or losses arising from the relevant activities of the potentially advantaged person or the other affected person in calculating the taxable profits of that person,

(g) the actual provision is not patent box provision in relation to the relevant period, and

(h) neither the potentially advantaged person nor the other affected person is an excluded company at any time in the relevant period.

(3) For the purposes of subsection (2)(d) the “reference currency” used by a company in relation to provision, or part of a provision, means the currency by reference to which the profits of the company, so far as they relate to the provision or part, are calculated for corporation tax purposes.

(4) Actual provision is patent box provision in relation to the relevant period if—

(a) it results in at least one of the affected persons having relevant IP income (within the meaning of Part 8A of CTA 2010) for an accounting period of that person falling (wholly or partially) within the relevant period, and

(b) an election under section 357A of that Act applies to that company for that accounting period.

(5) A company is an excluded company at any time if—

(a) it carries on a ring fence trade (within the meaning of Part 8 of CTA 2010) at that time,

(b) it has previously carried on (and has ceased carrying on) a ring fence trade, it has incurred general decommissioning expenditure (within the meaning given by section 163 of CAA 2001) and the time falls within the post-cessation period (within the meaning given by section 165(2) of that Act),

(c) it carries on oil contractor activities (within the meaning of Part 8ZA of CTA 2010) as part of a trade at that time,

(d) it carries on basic life assurance and general annuity business (within the meaning of Part 2 of FA 2012) at that time,

(e) it is a tonnage tax company (within the meaning of Schedule 22 to FA 2000) at that time,

(f) it is a banking company (within the meaning of Part 7A of CTA 2010) in relation to the accounting period of the company in which that time falls,

(g) it is, at that time, a company incorporated in the United Kingdom to which section 236 of FISMA 2000 applies (open-ended investment companies),

(h) it is a unit trust scheme in respect of which an order under section 243 of FISMA 2000 (authorised unit trust schemes) is in force at that time (see also section 617 of CTA 2010 which treats the trustees of such a scheme as a UK resident company for the purposes of the Tax Acts),

(i) it is an investment trust (see section 1158 of CTA 2010) with respect to the accounting period of the company in which that time falls,

(j) it is, or is a member of, a UK REIT (within the meaning of Part 12 of CTA 2010) at that time,

(k) section 83(1) of FA 2005 (application of accounting standards to securitisation companies) applies to the company in relation to a period of account in which that time falls,

(l) it is, at that time, a securitisation company within the meaning of the Taxation of Securitisation Companies Regulations 2006 to which those regulations apply,

(m) it is, at that time, an insurance securitisation company within the meaning of the Taxation of Insurance Securitisation Companies Regulations 2007,

(n) it is, at that time, a qualifying transformer vehicle within the meaning of the Risk Transformation (Tax) Regulations 2017 (see regulation 3),

(o) it is a QAHC (within the meaning of Schedule 2 to FA 2022) at that time,

(p) it is, or is a member of, a generating undertaking (within the meaning of Part 5 of F(No.2)A 2023) to whom generation receipts or allowable costs are attributed, in accordance with that Part, for the qualifying period in which that time falls, or

(q) it is a residential property developer (within the meaning of Part 2 of FA 2022) that has residential property developer profits (within the meaning of that Part) for the accounting period of the company in which that time falls.

(6) Subsection (1) does not apply to qualifying UK to UK provision in relation to a potentially advantaged person for a chargeable period of that person if the person elects—

(a) that subsection (1) does not apply (in relation to the person) in respect of that provision, or

(b) that subsection (1) does not apply to the person for that period.

(7) An election under subsection (6) may not be revoked.

(8) Subsection (1) also does not apply to qualifying UK to UK provision in relation to a potentially advantaged person for a chargeable period of that person if the Commissioners for His Majesty's Revenue and Customs give the person a notice that states—

(a) that subsection (1) does not apply (in relation to the person) in respect of that provision for that period, or

(b) that subsection (1) does not apply to the person for that period.

(9) The Commissioners may only give a notice under subsection (8) if they consider that it is expedient to give the notice for the purposes of avoiding any loss of tax that would, or may, otherwise result from the application of subsection (1).

(10) For the purposes of subsection (9), and section 170(1)(zb), the question of whether there is or may be a loss of tax is to be determined having regard to the positions of both of the affected persons.

(11) A notice under subsection (8) is referred to in this Chapter as a transfer pricing notice.

(12) See sections 169 to 171 for further provision about the giving of, and effect of, transfer pricing notices.]

Textual Amendments

F73 S. 164A inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 16(1), 32(1)

165 Exemption for dormant companies U.K.

(1) Section 147(3) and (5) do not apply in calculating for any chargeable period the profits and losses of a potentially advantaged person if that person is a company which meets the condition in subsection (2).

(2) The condition is that—

(a) the company was dormant throughout the pre-qualifying period, and

(b) apart from section 147, the company has continued to be dormant at all times since the end of the pre-qualifying period.

(3) In subsection (2) “the pre-qualifying period” means—

(a) if there is an accounting period of the company that ends on 31 March 2004, that accounting period, or

(b) if there is no such accounting period, the period of 3 months ending with that date.

(4) In this section “dormant” has the meaning given by section 1169 of the Companies Act 2006.

166 Exemption for small and medium-sized enterprises U.K.

(1) Section 147(3) and (5) do not apply in calculating for any chargeable period the profits and losses of a potentially advantaged person if that person is a small or medium-sized enterprise for that chargeable period (see section 172).

(2) Exceptions to subsection (1) are provided—

(a) in the case of a small enterprise, by [F74 sections 167 and 167A], and

(b) in the case of a medium-sized enterprise, by sections 167 and 168.

Textual Amendments

F74 Words in s. 166(2)(a) substituted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 3

Modifications etc. (not altering text)

C26 Ss. 166-171 excluded (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 542(2), 1184(1) (with Sch. 2)

C27 S. 166(1) disapplied (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 41(1)

167 Small and medium-sized enterprises: exceptions from exemption U.K.

(1) Subsections (2) and (3) set out exceptions to section 166(1).

(2) The first exception is if the small or medium-sized enterprise elects for section 166(1) not to apply in relation to the chargeable period.

Any such election is irrevocable.

(3) The second exception is if—

(a) the other affected person, or

(b) a party to a relevant transaction,

is, at the time when the actual provision is or was made or imposed, a resident of a non-qualifying territory (whether or not that person is also a resident of a qualifying territory).

(4) For the purposes of subsection (3)—

(a) a “party to a relevant transaction” is a person who, if the actual provision is or was imposed by means of a series of transactions, is or was a party to one or more of those transactions, and

(b) “qualifying territory” and “non-qualifying territory” are defined in section 173.

(5) In subsection (3) “resident”, in relation to a territory—

(a) means a person who, under the law of that territory, is liable to tax there by reason of the person's domicile, residence or place of management, but

(b) does not include a person who is liable to tax in that territory in respect only of income from sources in that territory or capital situated there.

Modifications etc. (not altering text)

C26 Ss. 166-171 excluded (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 542(2), 1184(1) (with Sch. 2)

[F75 167A Small enterprises: exception from exemption: transfer pricing notice U.K.

(1) Section 166(1) does not apply in relation to any provision made or imposed if—

(a) the potentially advantaged person is a small enterprise for the chargeable period,

(b) the person meets the condition in subsection (2), and

(c) the Commissioners for Her Majesty's Revenue and Customs give that person a notice requiring the person to calculate the profits and losses of that chargeable period in accordance with section 147(3) or (5) in the case of that provision.

(2) A person meets the condition referred to in subsection (1)(b) if—

(a) provision has been made or imposed as between the person and any other person by means of a transaction or series of transactions,

(b) the basic pre-condition in section 147 is met in respect of the provision, and

(c) the transaction, or one or more of the series of transactions, is taken into account in calculating, for the purposes of Part 8A of CTA 2010 (profits arising from the exploitation of patents etc), the relevant IP profits of a trade of a person who is or was a party to the transaction or transactions.

(3) A notice under subsection (1) is referred to in this Chapter as a transfer pricing notice.]

Textual Amendments

F75 S. 167A inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 4

168 Medium-sized enterprises: exception from exemption: transfer pricing notice U.K.

(1) Section 166(1) does not apply in relation to any provision made or imposed if—

(a) the potentially advantaged person is a medium-sized enterprise for the chargeable period, and

(b) the Commissioners for Her Majesty's Revenue and Customs give that person a notice requiring the person to calculate the profits and losses of that chargeable period in accordance with section 147(3) or (5) in the case of that provision.

(2) A notice under subsection (1) is referred to in this Chapter as a transfer pricing notice.

Modifications etc. (not altering text)

C26 Ss. 166-171 excluded (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 542(2), 1184(1) (with Sch. 2)

169 Giving of transfer pricing notices U.K.

(1) This section applies to a transfer pricing notice given to a person.

(2) The notice may be given in relation to—

(a) any provision specified, or of a description specified, in the notice, or

(b) every provision in relation to which one or other of the assumptions in section 147(3) and (5) would, apart from section 166(1), be required to be made when calculating the person's profits and losses for tax purposes.

(3) The notice may be given only after a notice of enquiry has been given to the person in relation to the person's tax return for the chargeable period concerned.

(4) The notice must identify the officer of Revenue and Customs to whom any notice of appeal under section 170 is to be given.

(5) In subsection (3) “notice of enquiry” means a notice under—

(a) section 9A or 12AC of TMA 1970, or

(b) paragraph 24 of Schedule 18 to FA 1998.

Modifications etc. (not altering text)

C26 Ss. 166-171 excluded (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 542(2), 1184(1) (with Sch. 2)

170 Appeals against transfer pricing notices U.K.

(1) A person to whom a transfer pricing notice is given may appeal against the decision to give the notice, but only [F76 on one of the following grounds—

[F77 (za) in the case of a transfer pricing notice given under section 148A(3), that the condition in section 148A(1)(c) is not met,]

[F78 (zb) in the case of a transfer pricing notice given under section 164A(8), that there would be no loss of tax resulting from—

(i) in the case of a notice under section 164A(8)(a), the application of section 164A(1) in relation to the chargeable period and provision to which the notice relates, or

(ii) in the case of a notice under section 164A(8)(b), the application of section 164A(1) in relation to that period and any qualifying UK to UK provision for which the person is the potentially advantaged person, or]

(a) that the condition in section 167A(1)(b) is not met, or

(b) that the condition in section 168(1)(a) is not met.]

[F79 (1A) A person to whom a transfer pricing notice is given under section 148A(3) may appeal against a decision of the Commissioners for His Majesty's Revenue and Customs to consider the case to which the notice relates analogous to a case that would meet the participation condition only as a result of section 161 (actual provision relates, to any extent, to financing arrangements).]

(2) [F80 An appeal under this section] must be brought by giving written notice of appeal to the officer of Revenue and Customs identified in the notice in accordance with section 169(4).

(3) The notice of appeal must be given before the end of the period of 30 days beginning with the day on which the transfer pricing notice is given.

Textual Amendments

F76 Words in s. 170(1) substituted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 5

F77 S. 170(1)(za) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 2(4)(a), 32(1)

F78 S. 170(1)(zb) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 16(2), 32(1)

F79 S. 170(1A) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 2(4)(b), 32(1)

F80 Words in s. 170(2) substituted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 2(4)(c), 32(1)

Modifications etc. (not altering text)

C26 Ss. 166-171 excluded (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 542(2), 1184(1) (with Sch. 2)

171 Tax returns where transfer pricing notice given U.K.

(1) If a transfer pricing notice is given to a person (“T”), T may amend T's tax return for the purpose of complying with the notice at any time before the end of the period of 90 days beginning with—

(a) the day on which the notice is given, or

(b) if T appeals under section 170 against the decision to give the notice, the day on which the appeal is finally determined or abandoned.

(2) If a transfer pricing notice is given in the case of any tax return, no closure notice may be given in relation to that tax return until—

(a) the end of the period of 90 days specified in subsection (1), or

(b) the earlier amendment of the tax return for the purpose of complying with the notice.

[F81 (2A) Subsection (2) does not apply to a partial closure notice which does not relate to any matter to which the transfer pricing notice relates.]

(3) So far as relating to any provision made or imposed by or in relation to a person—

(a) who is a [F82 small or] medium-sized enterprise for a chargeable period,

(b) who does not make an election under section 167(2) for that period, and

(c) who is not excepted from section 166(1) in relation to that provision for that period because of section 167(3),

the tax return required to be made for that period is a return that disregards section 147(3) and (5).

(4) Subsection (3) does not prevent a tax return for a period becoming incorrect if in the case of any provision made or imposed—

(a) a transfer pricing notice is given which has effect in relation to that provision for that period,

(b) the return is not amended in accordance with subsection (1) for the purpose of complying with the notice, and

(c) the return ought to have been so amended.

(5) In this section—

• “closure notice” means a notice under—

  (a)

  section 28A or 28B of TMA 1970, or

  (b)

  paragraph 32 of Schedule 18 to FA 1998,

• “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to FA 1998, as read with paragraph 4 of that Schedule, and

• “tax return” means—

  (a)

  a return under section 8, 8A or 12AA of TMA 1970, or

  (b)

  a company tax return.

Textual Amendments

F81 S. 171(2A) inserted (with effect in accordance with Sch. 15 para. 44 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 15 para. 40

F82 Words in s. 171(3)(a) inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 6

Modifications etc. (not altering text)

C26 Ss. 166-171 excluded (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 542(2), 1184(1) (with Sch. 2)

172 Meaning of “small enterprise” and “medium-sized enterprise” U.K.

(1) In this Chapter—

(a) “small enterprise” means a small enterprise as defined in the Annex, and

(b) “medium-sized enterprise” means an enterprise which—

(i) falls within the category of micro, small and medium-sized enterprises as defined in the Annex, and

(ii) is not a small enterprise as defined in the Annex.

(2) For the purposes of subsection (1), the Annex has effect with the modifications set out in subsections (4) to (7).

(3) In this section “the Annex” means the Annex to Commission Recommendation 2003/361/EC of 6 May 2003 (concerning the definition of micro, small and medium-sized businesses).

(4) Where any enterprise is in liquidation or administration, the rights of the liquidator or administrator (in that capacity) are to be left out of account when applying Article 3(3)(b) of the Annex in determining for the purposes of this Part whether—

(a) that enterprise, or

(b) any other enterprise (including that of the liquidator or administrator),

is a small or medium-sized enterprise.

(5) Article 3 of the Annex has effect with the omission of paragraph 5 (declaration in good faith where control cannot be determined etc).

(6) The first sentence of Article 4(1) of the Annex has effect as if the data to apply to—

(a) the headcount of staff, and

(b) the financial amounts,

were the data relating to the chargeable period referred to in section 166(1) (instead of the period described in that sentence) and calculated on an annual basis.

(7) Article 4 of the Annex has effect with the omission of the following provisions—

(a) the second sentence of paragraph 1 (data to be taken into account from date of closure of accounts),

(b) paragraph 2 (no change of status unless ceilings exceeded for two consecutive periods), and

(c) paragraph 3 (genuine estimate in case of newly established enterprise).

173 Meaning of “qualifying territory” and “non-qualifying territory” U.K.

(1) In section 167(3)—

• “non-qualifying territory” means any territory which is not a qualifying territory, and

• “qualifying territory” means—

  (a)

  the United Kingdom, or

  (b)

  any territory in relation to which condition A or condition B is met.

(2) Condition A is that—

(a) double taxation arrangements have been made in relation to the territory,

(b) the arrangements include a non-discrimination provision, and

(c) the territory is not designated as a non-qualifying territory for the purposes of this subsection in regulations made by the Treasury.

(3) Condition B is that—

(a) double taxation arrangements have been made in relation to the territory, and

(b) the territory is designated as a qualifying territory for the purposes of this subsection in regulations made by the Treasury.

(4) For the purposes of subsection (2)(b) a “non-discrimination provision”, in relation to any double taxation arrangements, is a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in any other contracting state to—

(a) any taxation, or

(b) any requirement connected with taxation,

which is other or more burdensome than the taxation and connected requirements to which nationals of that other state in the same circumstances (in particular with respect to residence) are or may be subjected.

(5) In subsection (4) “national”, in relation to a state, includes—

(a) any individual possessing the nationality or citizenship of the state, and

(b) any legal person, partnership or association deriving its status as such from the law in force in that state.

(6) In this section “double taxation arrangements” means arrangements that have effect under section 2(1) (double taxation relief by agreement with territories outside the United Kingdom).

(7) Regulations under this section may only be made if a draft of the statutory instrument containing the regulations has been laid before and approved by a resolution of the House of Commons.

[F83 173A Exchange gains and losses arising as a result of qualifying loan relationships and derivative contracts U.K.

(1) Neither subsection (3) nor (5) of section 147 applies in relation to exchange gains and losses to the extent they arise, or would arise if either subsection applied, in relation to a qualifying financial instrument of a company.

(2) Accordingly, for the purposes of determining whether actual provision confers a potential advantage on a person, ignore the effect of so much of any exchange gain or loss as arises, or would have arisen, in relation to a qualifying financial instrument.

(3) In this section a qualifying financial instrument of a company means a financial instrument that is, or forms part of, actual provision to the extent—

(a) it is matched with another financial instrument of the company,

(b) it forms part of a currency tax offset arrangement,

(c) an exchange gain or loss arising to the company in relation to the financial instrument would be—

(i) prescribed an exchange gain or loss under regulation 3(1) or (5), 4(1) or (4A) or 5A(1) of the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004,

(ii) an excluded amount for the purposes of sections 598(1)(a) and 606(4) of CTA 2009 as a result of regulation 5ZA(1) of those regulations, or

(iii) an excluded amount for the purposes of section 598(1)(a) of CTA 2009 as a result of regulation 7A of those regulations,

(d) the financial instrument gives rise to regulation 7 fair value profits or losses within the meaning of regulation 7 of those regulations, or

(e) the financial instrument is wholly denominated in the reference currency used by the company in relation to the actual provision, or the part of the actual provision, to which the financial instrument relates.

(4) A financial instrument of a company is matched with another financial instrument of the company to the extent that one is intended by the company to act to eliminate or substantially reduce the currency risk of the other.

(5) A financial instrument of a company forms part of a currency tax offset arrangement to the extent that—

(a) the company (“the first company”) has an exchange gain or loss arising in relation to the instrument and that would (ignoring this Part) be brought into account,

(b) that gain or loss is offset by a corresponding exchange loss or gain arising to another company in relation to that financial instrument or another financial instrument and that would (ignoring this Part) be brought into account by that other company, and

(c) the companies intended that the gain or loss referred to in paragraph (a) would be offset by the loss or gain referred to in paragraph (b).

(6) In this section—

• “currency risk” means a risk which can be attributed to fluctuations in exchange rates between currencies over a period of time;

• “financial instrument” means—

  (a)

  a loan relationship, or

  (b)

  a derivative contract;

• “reference currency”, in relation to a company and actual provision or part of actual provision, means the currency by reference to which the profits of the company, so far as they relate to the provision or part, are calculated for corporation tax purposes.]

Textual Amendments

F83 S. 173A inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 29(2), 32(1) (with Sch. 6 para. 32(3))

CHAPTER 4 U.K. Position, if only one affected person potentially advantaged, of other affected person

Claim by affected person who is not advantaged U.K.

174 Claim by the affected person who is not potentially advantaged [F84 etc] U.K.

(1) Subsection (2) applies if—

(a) only one of the affected persons (in this Chapter called “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 (in this Chapter called “the disadvantaged person”) is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities (see section 216).

[F85 (1A) Subsection (2) also applies in any case where—

(a) one of the affected persons is a non-UK resident company with a permanent establishment in the United Kingdom,

(b) the taxable profits of that company are calculated, as a result of section 21 of CTA 2009, as if the arm’s length provision (to some extent) had been made or imposed between the permanent establishment and the other affected person, and

(c) if the actual provision (to the extent corresponding to the arm’s length provision treated as made or imposed between the permanent establishment and the other person) had been made or imposed between the permanent establishment and the other person, that provision—

(i) would confer a potential advantage on the non-UK resident company in relation to United Kingdom taxation, and

(ii) would not confer a potential advantage on the other person in relation to United Kingdom taxation.

(1B) For the purposes of applying that subsection in such a case—

(a) the permanent establishment is to be regarded as “the advantaged person”,

(b) the other affected person is to be regarded as the “disadvantaged person”,

(c) the reference to the arm’s length provision is to that provision to the extent it is treated as having been made or imposed between the permanent establishment and the other affected person for the purpose of calculating the profits of the non-UK resident company, and

(d) the reference to the actual provision is to that provision to the extent that it as corresponds to the arm’s length provision treated as having been made or imposed between the permanent establishment and the other affected person for that purpose.]

(2) On the making of a claim by the disadvantaged person—

(a) the profits and losses of the disadvantaged person are to be calculated for tax purposes as if the arm's length provision had been made or imposed instead of the actual provision, and

(b) despite any limit in the Tax Acts on the time within which any adjustment may be made, all such adjustments are to be made in the disadvantaged person's 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) Provision about claims under this section is made by—

• [F86 section 174A (claim not allowed in some cases where the disadvantaged person is within the charge to income tax), ]

• section 175 ([F87 application of section 174 where guarantee disallowed]),

• section 176 (claim cannot be made unless advantaged person has made return on the basis that the arm's length provision applies),

• section 177 (when claim may be made or amended), and

• sections 181 to 184 (option to make claims in accordance with section 182 in some cases where actual provision relates to a security issued by one of the affected persons).

(4) Subsection (2) has effect subject to—

• section 180 (closing trading stock and closing work in progress in a trade),

• sections 188 and 189 (effect of claims under this section on double taxation relief), [F88 and]

• Chapter 5 (provision, where liabilities of an affected person under securities issued by that person are guaranteed, for attribution to guarantor of things done by that affected person),

• F89 ...

• .

Textual Amendments

F84 Word in s. 174 heading inserted (retrospectively) by Finance Act 2026 (c. 11), Sch. 6 para. 19(1)(a)(3)

F85 S. 174(1A)(1B) inserted (retrospectively) by Finance Act 2026 (c. 11), Sch. 6 para. 19(1)(b), (3)

F86 Words in s. 174(3) inserted (with effect in accordance with s. 75(5)(6) of the amending Act) by Finance Act 2014 (c. 26), s. 75(2)

F87 Words in s. 174(3) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(7), 12

F88 Word in s. 174(4) inserted (for chargeable periods commencing on or after 1.1.2026) by Finance Act 2026 (c. 11), Sch. 6 paras. 30(4)(d)(i), 32(1) (with Sch. 6 para. 32(3))

F89 Words in s. 174(4) omitted (for chargeable periods commencing on or after 1.1.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 30(4)(d)(ii), 32(1) (with Sch. 6 para. 32(3))

[F90 174A Claims under section 174 where disadvantaged person within charge to income tax U.K.

A claim under section 174 may not be made if—

(a) the disadvantaged person is a person (other than a company) within the charge to income tax in respect of profits arising from the relevant activities, and

(b) the advantaged person is a company.]

Textual Amendments

F90 S. 174A inserted (with effect in accordance with s. 75(5)(6) of the amending Act) by Finance Act 2014 (c. 26), s. 75(3)

[F91 175 Application of section 174 where guarantee disallowed U.K.

(1) Subsection (2) applies where—

(a) the actual provision includes provision for the borrowing of an amount,

(b) that amount would not have been lent between independent enterprises but for a guarantee,

(c) such a guarantee was provided by a person with whom the borrower has a participatory relationship, and

(d) the participation condition, in relation to the actual provision for the borrowing—

(i) would not be satisfied but for section 161 (indirect participation), or

(ii) is satisfied as a result of a notice given under section 148A(3), and the Commissioners for His Majesty's Revenue and Customs consider that the case is analogous to a case that would meet the participation condition only as a result of section 161.

(2) For the purposes of section 174(2), the amount is to be treated as if it had been lent to the guarantor on equivalent terms to the terms on which it was lent to the borrower.

(3) Section 154 (interpretation of section 153A and 153B) applies for the purposes of this section as it applies for the purposes of sections 153A and 153B.]

Textual Amendments

F91 S. 175 substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 4(8), 12

176 Claims under section 174: advantaged person must have made return U.K.

(1) A claim may not be made under section 174 unless a calculation 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.

(2) A claim made under section 174 must be consistent with the calculation made on that basis in the case of the advantaged person.

(3) For the purposes of subsections (1) and (2), a calculation is to 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 calculations made for the purposes of any return by the advantaged person have been made on that basis because of this Part [F92 or Chapter 4 of Part 2 of CTA 2009], or

(b) a relevant notice (see section 190) given to the advantaged person takes account of a determination in pursuance of this Part of an amount to be brought into account for tax purposes on that basis.

Textual Amendments

F92 Words in s. 176(3)(a) inserted (retrospectively) by Finance Act 2026 (c. 11), Sch. 6 para. 19(2)(3)

177 Time for making, or amending, claim under section 174 U.K.

(1) A claim under section 174 can be made only in the period mentioned in subsection (2) or (3).

(2) If a return has been made by the advantaged person on the basis mentioned in section 176(1), the period is the two years beginning with the day of the making of the return.

(3) If a relevant notice (see section 190) taking account of such a determination as is mentioned in section 176(3)(b) has been given to the advantaged person, the period is the two years beginning with the day on which that notice was given.

(4) Subsection (5) applies if—

(a) a claim under section 174 is made in relation to a return made on the basis mentioned in section 176(1), and

(b) a relevant notice taking account of such a determination as is mentioned in section 176(3)(b) is subsequently given to the advantaged person.

(5) The disadvantaged person is entitled, within the period mentioned in subsection (3), to make any such amendment of the claim as may be appropriate in consequence of the determination contained in the relevant notice.

(6) Subsections (1) and (5) have effect subject to section 186(3) (which provides for the extension of the period for making or amending a claim).

178 Meaning of “return” in sections 176 and 177 U.K.

(1) In sections 176 and 177 “return” means—

(a) any return required to be made under TMA 1970 or under Schedule 18 to FA 1998 for income tax or corporation tax purposes, or

(b) any voluntary amendment of a return within paragraph (a).

(2) In subsection (1)(b) “voluntary amendment” means—

(a) an amendment under section 9ZA or 12ABA of TMA 1970 (amendment of personal, trustee or partnership return by taxpayer), or

(b) an amendment under Schedule 18 to FA 1998 other than one made in response to the giving of a relevant notice (see section 190).

Claims: special cases U.K.

179 Compensating payment if advantaged person is controlled foreign company U.K.

[F93 (1) Subsection (2) applies if—

(a) the actual provision is provision made or imposed in relation to a CFC,

(b) for the purpose of determining the CFC's assumed taxable total profits for an accounting period, the CFC's profits and losses are to be calculated in accordance with section 147(3) or (5) in the case of that provision,

(c) in relation to the accounting period, sums are charged on chargeable companies at step 5 in section 371BC(1), and

(d) in consequence of the application of section 147(3) or (5) as mentioned in paragraph (b), the total of those sums is more than it would otherwise be.]

(2) Sections 174 to 178 have effect as if the [F94 CFC] were a person on whom a potential advantage in relation to United Kingdom taxation were conferred by the actual provision.

(3) In applying sections 174 to 178 in a case in which they apply because of subsection (2)—

(a) references to the advantaged person in sections 176(3)(a) and (b) and 177(2), (3) and (4)(b) include a reference to any of the [F95 chargeable companies on which a sum is charged], and

(b) references to corporation tax include a reference to [F96 the CFC charge].

[F97 (4) In this section terms which are defined in Part 9A have the same meaning as they have in that Part.

(5) For the purposes of subsections (1)(c) and (d) and (3)(a) assume that any claims made under Chapter 9 of Part 9A for the accounting period were not made.]

Textual Amendments

F93 S. 179(1) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 42(2)

F94 Words in s. 179(2) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 42(3)

F95 Words in s. 179(3)(a) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 42(4)(a)

F96 Words in s. 179(3)(b) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 42(4)(b)

F97 S. 179(4)(5) substituted for s. 179(4) (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 42(5)

180 Application of section 174(2)(a) in relation to transfers of trading stock etc U.K.

(1) Section 174(2)(a) does not affect the credits to be brought into account by the disadvantaged person in respect of—

(a) closing trading stock, or

(b) closing work in progress in a trade,

for accounting periods ending on or after the day given by subsection (2).

(2) That day is the last day of the accounting period of the advantaged person in which the actual provision was made or imposed.

(3) For the purposes of this section “trading stock”, in relation to any trade, has the meaning given by—

(a) section 174 of ITTOIA 2005, or

(b) section 163 of CTA 2009.

Alternative way of claiming if [F98 borrowing] is involved U.K.

Textual Amendments

F98 Word in s. 181 cross-heading substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(1), 12

181 Section 182 applies to claims where actual provision relates to [F99 borrowing] U.K.

(1) Subsection (2) applies if—

F100 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the actual provision is provision in relation to [F101 borrowing].

(2) A claim under section 174 may be made in accordance with section 182.

(3) For the purposes of this Part, a “section 182 claim” is a claim under section 174 made in accordance with section 182.

[F102 (4) For the purposes of this section “borrowing” has the meaning it has in sections 153A and 153B (see section 154).]

Textual Amendments

F99 Word in s. 181 heading substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(2)(a), 12

F100 S. 181(1)(a) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(2)(b)(i), 12

F101 Word in s. 181(1)(b) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(2)(b)(ii), 12

F102 S. 181(4) substituted for s. 181(4)(5) (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(2)(c), 12

182 Making of section 182 claims U.K.

(1) A section 182 claim may be made by—

(a) the disadvantaged person, or

(b) the advantaged person.

(2) A section 182 claim made by the advantaged person is to be taken to be made on behalf of the disadvantaged person.

(3) A section 182 claim may be made before or after a calculation within section 176(1) has been made.

(4) A section 182 claim must be made either—

(a) at any time before the end of the period mentioned in section 177(2), or

(b) within the period mentioned in section 177(3).

(5) Subsection (4) has effect subject to section 186(3) (which provides for the extension of the period for making a claim).

183 Giving effect to section 182 claims U.K.

(1) A section 182 claim is not a claim within paragraph 57 or 58 of Schedule 18 to FA 1998 (company tax returns, assessments and related matters).

(2) Accordingly, paragraph 59 of that Schedule (application of Schedule 1A to TMA 1970) has effect in relation to a section 182 claim.

(3) If—

(a) a section 182 claim is made before a calculation within section 176(1) has been made,

(b) such a calculation is subsequently made, and

(c) the claim is not consistent with the calculation,

the affected persons are to be treated as if (instead of the claim actually made) a claim had been made that was consistent with the calculation.

(4) All such adjustments are to be made (including by the making of assessments) as are required to give effect to subsection (3).

(5) Subsection (4) has effect despite any limit on the time within which any adjustment may be made.

184 Amending a section 182 claim if it is followed by relevant notice U.K.

(1) Subsection (2) applies if—

(a) a section 182 claim is made,

(b) a return is subsequently made by the advantaged person on the basis mentioned in section 176(1), and

(c) a relevant notice (see section 190) taking account of such a determination as is mentioned in section 176(3)(b) is subsequently given to the advantaged person.

(2) If any amendment of the claim is appropriate in consequence of the determination contained in the relevant notice, the amendment may be made by—

(a) the disadvantaged person, or

(b) the advantaged person.

(3) If an amendment under subsection (2) is made by the advantaged person it is to be taken to be made on behalf of the disadvantaged person.

(4) Any amendment under subsection (2) must be made within the period mentioned in section 177(3).

(5) Subsection (4) has effect subject to section 186(3) (which provides for the extension of the period for making an amendment).

Notification to persons who may be disadvantaged U.K.

185 Notice to potential claimants U.K.

(1) Subsection (2) applies if—

(a) a relevant notice (see section 190) is given to any person,

(b) the notice, or anything contained in it, takes account of a transfer-pricing determination, and

(c) it appears to an officer that there is a person (“DP”) who is or may be a disadvantaged person by reference to the subject-matter of the determination.

(2) The officer must give to DP a notice containing particulars of the determination.

(3) A contravention of subsection (2) does not affect the validity—

(a) of the relevant notice, or

(b) of any determination to which the notice relates.

(4) For the purposes of this section, a person is a disadvantaged person by reference to the subject-matter of a transfer-pricing determination if (and only if) the person—

(a) is entitled, in consequence of the making of the determination, to make or amend a claim under section 174, or

(b) will be entitled, because of section 212(3), to be a party to any proceedings on an appeal relating to the determination.

(5) In this section—

• “officer” means officer of Revenue and Customs, and

• “transfer-pricing determination” means a determination of an amount that is to be brought into account for tax purposes in respect of—

  (a)

  any assumption made under section 147(3) or (5), or

  (b)

  any advance-pricing-agreement assumptions (see section 222(6)).

186 Extending claim period if notice under section 185 not given or given late U.K.

(1) If there is a contravention of section 185(2), the Commissioners must consider whether, as a result of the contravention, any person has been prejudiced with respect to the making or amendment of a claim under section 174.

(2) Subsection (3) applies if—

(a) there is a contravention of section 185(2), or

(b) a notice required by section 185(2) is given after the relevant notice concerned.

(3) The Commissioners may, if they think fit, treat the period for the making or amendment of a claim under section 174 in the case concerned as extended by such further period as appears to them to be appropriate.

(4) In this section “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

Treatment of interest where claim made U.K.

187 Tax treatment if actual interest exceeds arm's length interest U.K.

(1) Subsection (6) applies if the following conditions are met.

(2) Condition A is that interest is paid by any person under the actual provision.

(3) Condition B is that section 147(3) or (5) applies in relation to the actual provision.

(4) Condition C is—

(a) that the amount (“ALINT”) of interest that would have been payable under the arm's length provision is less than the amount of interest paid under the actual provision, or

(b) that there would not have been any interest payable under the arm's length provision (so that ALINT is nil).

(5) Condition D is that the person receiving the interest paid under the actual provision makes—

(a) a claim under section 174, or

(b) a section 182 claim.

(6) The interest paid under the actual provision, so far as it exceeds ALINT—

(a) is not to be regarded as chargeable under Chapter 2 of Part 4 of ITTOIA 2005,

(b) is not subject to the provisions of Part 15 of ITA 2007 (deduction of income tax at source), and

(c) is not required to be brought into account under Part 5 of CTA 2009 (loan relationships) as a non-trading credit.

[F103 Treatment of interest where claim prevented by section 174A U.K.

Textual Amendments

F103 S. 187A and cross-heading inserted (with effect in accordance with s. 75(5)(6) of the amending Act) by Finance Act 2014 (c. 26), s. 75(4)

187A Excess interest treated as a F104 ... distribution U.K.

(1) Subsection (2) applies if Conditions A to C in section 187 are met in circumstances where section 174A prevents a claim under section 174.

(2) The interest paid under the actual provision, so far as it exceeds ALINT, is treated for the purposes of the Income Tax Acts as a dividend paid by the company which paid the interest (and, accordingly, as a F105 ...distribution).]

Textual Amendments

F104 Word in s. 187A heading omitted (with effect in accordance with Sch. 1 para. 73 of the amending Act) by virtue of Finance Act 2016 (c. 24), Sch. 1 para. 68(3)

F105 Word in s. 187A(2) omitted (with effect in accordance with Sch. 1 para. 73 of the amending Act) by virtue of Finance Act 2016 (c. 24), Sch. 1 para. 68(3)

Adjustment of double taxation relief where claim made U.K.

188 Double taxation relief by way of credit for foreign tax U.K.

(1) Subsection (2) applies if—

(a) a claim is made under section 174, and

(b) the disadvantaged person (“DP”) is entitled on that claim to make a calculation, or to have an adjustment made, on the basis that the arm's length provision was made or imposed instead of the actual provision.

(2) Assumptions A and B are to be made in DP's case in relation to any credit for foreign tax which DP has been, or may be, given—

(a) under any double taxation arrangements, or

(b) under section 18(1)(b) and (2) (relief under unilateral relief arrangements).

(3) Subsection (2) has effect subject to section 189(2).

(4) Assumption A is that the foreign tax paid or payable by DP does not include any amount of foreign tax which would not be or have become payable were it to be assumed for the purposes of that tax that the arm's length provision had been made or imposed instead of the actual provision.

(5) Assumption B is that the amount of DP's relevant profits in respect of which DP is given credit for foreign tax does not include the amount (if any) by which DP's relevant profits are treated as reduced in accordance with section 174.

(6) If any adjustment is required to be made for the purpose of giving effect to any of the preceding provisions of this section—

(a) it may be made by setting the amount of the adjustment against any relief or repayment to which DP is entitled in pursuance of DP's claim under section 174, and

(b) nothing in the Tax Acts limiting the time within which any assessment is to be or may be made or amended prevents that adjustment from being so made.

(7) In subsection (5) “DP's relevant profits” means the profits arising to DP from the carrying on of the relevant activities (see section 216).

(8) In this section—

• “double taxation arrangements” means arrangements that have effect under section 2(1) (double taxation relief by agreement with territories outside the United Kingdom), and

• “foreign tax” means—

  (a)

  any tax under the law of a territory outside the United Kingdom, or

  (b)

  any amount that, for the purposes of any double taxation arrangements, is to be treated as if it were tax under the law of a territory outside the United Kingdom.

(9) In determining for the purposes of this section whether a person is—

(a) under any double taxation arrangements, or

(b) under section 18(1)(b) and (2),

to be given credit for foreign tax, ignore any requirement that a claim is made before such a credit is given.

189 Double taxation relief by way of deduction for foreign tax U.K.

(1) Subsection (2) applies if—

(a) a claim is made under section 174,

(b) the disadvantaged person (“DP”) is entitled on that claim to make a calculation, or to have an adjustment made, on the basis that the arm's length provision was made or imposed instead of the actual provision,

(c) the application of that basis in the calculation of DP's profits or losses for any chargeable period involves a reduction in the amount of any income, and

(d) that income is also income that is to be reduced in accordance with section 112(1) (deduction for foreign tax where no credit allowed).

(2) If this subsection applies—

(a) the reduction mentioned in subsection (1)(c) is to be treated as made before any reduction under section 112(1), and

(b) tax paid, in the place in which any income arises, on so much of that income as is represented by the amount of the reduction mentioned in subsection (1)(c) is to be disregarded for the purposes of section 112(1).

(3) If any adjustment is required to be made for the purpose of giving effect to any of the preceding provisions of this section—

(a) it may be made by setting the amount of the adjustment against any relief or repayment to which DP is entitled in pursuance of DP's claim under section 174, and

(b) nothing in the Tax Acts limiting the time within which any assessment is to be or may be made or amended prevents that adjustment from being so made.

Interpretation of Chapter U.K.

190 Meaning of “relevant notice” U.K.

In this Chapter “relevant notice” means—

(a) a closure notice under section 28A(1) of TMA 1970 in relation to an enquiry into a return under section 8 or 8A of TMA 1970,

(b) a closure notice under section 28B(1) of TMA 1970 in relation to an enquiry into a partnership return,

(c) a closure notice under paragraph 32 of Schedule 18 to FA 1998 in relation to an enquiry into a company tax return,

(d) a notice under section 30B(1) of TMA 1970 amending a partnership return,

(e) a notice of an assessment under section 29 of TMA 1970,

(f) a notice of a discovery assessment under paragraph 41 of Schedule 18 to FA 1998 (which includes a discovery assessment under that paragraph as applied by paragraph 52 of that Schedule), or

(g) a notice of a discovery determination under paragraph 41 of Schedule 18 to FA 1998.

CHAPTER 5 U.K. Position of guarantor of affected person's [F106 borrowing liabilities]

Textual Amendments

F106 Words in s. 191 cross-heading substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 5, 12

191 When sections 192 to 194 apply U.K.

(1) Sections 192 to 194 apply if—

(a) one of the affected persons (“the [F107 borrower]”) [F108 has borrowing liabilities],

(b) those liabilities are to any extent the subject of a guarantee provided by a company (“the guarantor company”),

(c) in calculating the profits and losses of the [F109 borrower] for tax purposes, the amounts to be deducted in respect of interest or other amounts payable [F110 in respect of the borrowing] are required to be reduced (whether or not to nil) under section 147(3) or (5), and

[F111 (d) the reduction is a result of provision for the guarantee not being regarded as arm’s length in accordance with section 153A (certain guarantees not capable of being arm’s length).]

F112 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F112 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F112 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) In this Chapter—

• [F113 “borrowing”, “guarantee” and “implicit support” have the meanings they have in sections 153A and 153B (see section 154);

• “the borrowing transaction” means the transaction mentioned in subsection (1)(a);]

• “the guarantor company” has the meaning given by subsection (1)(b),

• “the [F114 borrower]” has the meaning given by subsection (1)(a), and

• F115 ...

Textual Amendments

F107 Word in s. 191(1)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 6(2)(a)(i), 12

F108 Words in s. 191(1)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 6(2)(a)(ii), 12

F109 Word in s. 191(1)(c) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 6(2)(b)(i), 12

F110 Words in s. 191(1)(c) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 6(2)(b)(ii), 12

F111 S. 191(1)(d) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 6(2)(c), 12

F112 S. 191(2)-(4) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 6(3), 12

F113 Words in s. 191(5) inserted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 6(4)(c), 12

F114 Word in s. 191(5) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 6(4)(a), 12

F115 Words in s. 191(5) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 6(4)(b), 12

192 Attribution to guarantor company of things done by [F116 borrower] U.K.

(1) On the making of a claim, the guarantor company is, to the extent of the reduction mentioned in [F117 subsection (1)(c) of section 191 (so far as it meets the condition in subsection (1)(d) of that section)], to be treated for all purposes of the Taxes Acts as if it (and not the [F118 borrower])—

F119 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F120 (b) was the person that owed the borrowing liabilities under the borrowing transaction, and]

(c) had paid any interest or other amounts paid under it by the [F121 borrower].

(2) Subsection (1) is subject to subsection (3).

(3) Where the [F122 borrower’s liabilities under the borrowing transaction] are the subject of two or more guarantees (whether or not provided by the same person), TD must not exceed TR, where—

• TD is the total of the amounts brought into account by the guarantor companies because of subsection (1), and

• TR is the total amount of the reductions within section 191(1)(c).

(4) Provision about claims under subsection (1) is made by—

• section 193 (interaction between claims under subsection (1) and claims under section 174), and

• section 194 (general provision about claims under subsection (1)).

(5) In subsection (1) “the Taxes Acts” has the meaning given by section 118(1) of TMA 1970.

F123 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F116 Word in s. 192 heading substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 7(2), 12

F117 Words in s. 192(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 7(3)(a)(i), 12

F118 Word in s. 192(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 7(3)(a)(ii), 12

F119 S. 192(1)(a) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 7(3)(b), 12

F120 S. 192(1)(b) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 7(3)(c), 12

F121 Word in s. 192(1)(c) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 7(3)(d), 12

F122 Words in s. 192(3) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 7(4), 12

F123 S. 192(6) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 7(5), 12

[F124 192A Provision for cases within Part 6A U.K.

(1) Subsection (2) applies to the extent that—

(a) there is an amount to be deducted in respect of a payment by the [F125 borrower in respect of the borrowing transaction],

(b) that amount is required to be reduced (whether or not to nil) under section 147(3) or (5),

(c) the guarantor company makes a claim under section 192(1) in respect of that reduction, and

(d) as regards the payment, provision in Part 6A would, but for the reduction, apply in relation to the tax treatment of the [F126 borrower] (“the relevant tax treatment”).

(2) The relevant tax treatment is to apply in relation to the guarantor company.]

Textual Amendments

F124 S. 192A inserted (with effect in accordance with Sch. 7 paras. 37-39 of the amending Act) by Finance Act 2021 (c. 26), Sch. 7 para. 31

F125 Words in s. 192A(1)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 8(a), 12

F126 Word in s. 192A(1)(d) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 8(b), 12

193 Interaction between claims under sections 174 and 192(1) U.K.

(1) In this section “the loan provision” means the actual provision made or imposed between—

(a) the [F127 borrower], and

[F128 (b) another person (“the lender”)]

which is provision in relation to the [F129 borrowing transaction].

(2) Subsections (3) and (4) apply if—

(a) the guarantor company makes a claim under section 192(1), and

(b) the [F130 lender] makes a claim under section 174 in relation to the loan provision.

(3) In determining the arm's length provision for the purposes of section 174(2)(a) in relation to the [F131 lender’s] claim, additional amounts are to be brought into account as credits corresponding to the debits that fall to be brought into account by the guarantor company because of section 192(1).

(4) If—

(a) the [F132 lender] makes its claim under section 174 before the guarantor company makes its claim under section 192(1), and

(b) the calculation on which the [F133 lender’s] claim is based does not comply with subsection (3),

the guarantor company's claim is to be disallowed.

Textual Amendments

F127 Word in s. 193(1)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 9(a)(i), 12

F128 S. 193(1)(b) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 9(a)(ii), 12

F129 Words in s. 193(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 9(a)(iii), 12

F130 Word in s. 193(2)(b) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 9(b), 12

F131 Word in s. 193(3) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 9(c), 12

F132 Word in s. 193(4)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 9(d)(i), 12

F133 Word in s. 193(4)(b) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 9(d)(ii), 12

194 Claims under section 192(1): general provisions U.K.

(1) A claim under section 192(1) may be made—

(a) by the guarantor company,

(b) if there are two or more guarantor companies, by those companies acting together, or

(c) by the [F134 borrower].

(2) A claim made under section 192(1) by the [F135 borrower] is to be taken to be made on behalf of the guarantor company or companies.

(3) Sections 175 to 177 apply in relation to a claim under section 192(1) made by or on behalf of any person or persons as they apply in relation to a claim under section 174 made by the disadvantaged person, but taking—

(a) references in sections 176 and 177 to the advantaged person as references to the [F136 borrower], and

(b) the reference in section 177 to the disadvantaged person as a reference to the guarantor company or companies.

Textual Amendments

F134 Word in s. 194(1)(c) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 10(2), 12

F135 Word in s. 194(2) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 10(3), 12

F136 Word in s. 194(3)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 10(4), 12

CHAPTER 6 U.K. Balancing payments

195 Qualifying conditions for purposes of section 196 U.K.

(1) Conditions A to D are “the qualifying conditions” for the purposes of section 196.

(2) Condition A is that 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.

(3) Condition B is that 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 (see section 216).

(4) Condition C is that—

(a) a payment (the “balancing payment”) is made, or

(b) two or more payments (the “balancing payments”) are made,

to the advantaged person by the disadvantaged person.

(5) Condition D is that the sole or main reason for making that payment or those payments is that section 147(3) or (5) applies.

196 Balancing payments between affected persons: no charge to, or relief from, tax U.K.

(1) If each of the qualifying conditions (see section 195) is met, subsection (2) applies—

(a) to the balancing payment if, or so far as, its amount does not exceed the available compensating adjustment, or

(b) to the balancing payments if, or so far as, their total amount does not exceed the available compensating adjustment.

(2) Any payment to which this subsection applies—

(a) is not to be taken into account in calculating profits or losses of either of the affected persons for the purposes of income tax or corporation tax, and

(b) is not for any purpose of the Corporation Tax Acts to be regarded as a distribution.

(3) In subsection (1) “the available compensating adjustment” means the difference between PL1 and PL2 where—

• PL1 is the profits and losses of the disadvantaged person calculated for tax purposes on the basis of the actual provision, and

• PL2 is the profits and losses of the disadvantaged person as (or as they would be) calculated for tax purposes on a claim under section 174.

(4) For the purposes of subsection (3), take PL1 or PL2—

(a) as a positive amount if it is an amount of profits, and

(b) as a negative amount if it is an amount of losses.

(5) In this section, the following expressions have the meaning given by section 195—

• “the balancing payment” and “the balancing payments”, and

• “the disadvantaged person”.

197 Qualifying conditions for purposes of section 198 U.K.

(1) Conditions A to F are the qualifying conditions for the purposes of section 198.

(2) Condition A is that one of the affected persons F137 ... has [F138 borrowing liabilities].

(3) Condition B is that those liabilities are to any extent the subject of a guarantee provided by a company (“the guarantor company”).

(4) Condition C is that, in calculating the profits and losses of the [F139 borrower] for tax purposes, the amounts to be deducted in respect of interest or other amounts payable [F140 in respect of the borrowing] are required to be reduced (whether or not to nil) under section 147(3) or (5).

(5) Condition D is that that reduction is required because of section [F141 section 153A].

(6) Condition E is that—

(a) a payment (the “balancing payment”) is made, or

(b) two or more payments (the “balancing payments”) are made,

by the guarantor company to the [F142 borrower].

(7) Condition F is that the sole or main reasons for making that payment or those payments are—

(a) that section 147(3) or (5) applies because of section [F143 section 153A], or

(b) that sections 192 to 194 apply.

[F144 (8) For the purposes of this Chapter, “borrowing” and “guarantee” have the meanings they have in sections 153A and 153B (see section 154).]

Textual Amendments

F137 Words in s. 197(2) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(a)(i), 12

F138 Words in s. 197(2) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(a)(ii), 12

F139 Word in s. 197(4) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(b)(i), 12

F140 Words in s. 197(4) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(b)(ii), 12

F141 Words in s. 197(5) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(c), 12

F142 Word in s. 197(6) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(d), 12

F143 Words in s. 197(7)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(e), 12

F144 S. 197(8) substituted for s. 197(8)-(10) (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(3)(f), 12

198 Balancing payments by guarantor to [F145 borrower]: no charge to, or relief from, tax U.K.

(1) If each of the qualifying conditions (see section 197) is met, subsection (2) applies to the balancing payments made by all of the [F146 guarantors] if, or so far as, the total amount of those payments does not exceed the total amount of the reductions within section 197(4) [F147 that are result of the application of section 153A].

(2) Payments to which this subsection applies—

(a) are not to be taken into account in calculating for [F148 tax purposes] the profits or losses of the guarantor company or companies or the [F149 borrower], and

(b) are not for any purpose of the F150 ... Tax Acts to be regarded as distributions.

(3) In this section, the following expressions have the meaning given by section 197—

• “the balancing payments”,

• “the guarantor company”, and

• F151 ...

Textual Amendments

F145 Word in s. 198 heading substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(4)(a), 12

F146 Word in s. 198(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(4)(b)(i), 12

F147 Words in s. 198(1) inserted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(4)(b)(ii), 12

F148 Words in s. 198(2)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(4)(c)(i), 12

F149 Word in s. 198(2)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(4)(c)(ii), 12

F150 Word in s. 198(2)(b) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(4)(d), 12

F151 Words in s. 198(3) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(4)(e), 12

199 Pre-conditions for making election under section 200 U.K.

(1) Conditions A to E are the pre-conditions for the purposes of section 200.

(2) Condition A is that both of the affected persons are companies.

(3) Condition B is that 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.

(4) Condition C is that 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 (see section 216).

(5) Condition D is that the actual provision is provision in relation to [F152 borrowing (“the relevant borrowing”)].

(6) Condition E is that the capital market condition is met (see section 204).

F153 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F154 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F152 Words in s. 199(5) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(5)(a), 12

F153 S. 199(7) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(5)(b), 12

F154 S. 199(8) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(5)(b), 12

200 Election to pay tax rather than make balancing payments U.K.

(1) If each of the pre-conditions (see section 199) is met, the disadvantaged person may make an election—

(a) to make no balancing payment within section 196 to the advantaged person in connection with section 147(3) or (5) applying because of [F155 section 153A] in relation to the relevant [F156 borrowing] in a chargeable period, but

(b) instead, to undertake sole responsibility for discharging the advantaged person's liability to tax for that period so far as resulting from section 147(3) or (5) applying because of [F155 section 153A] in relation to the relevant [F156 borrowing].

(2) Section 203 contains provision about the making and effect of elections under this section.

(3) In this section, the following expressions have the meaning given by section 199—

• “the advantaged person”,

• “the disadvantaged person”, and

• “the relevant [F157 borrowing]”.

Textual Amendments

F155 Words in s. 200(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(6)(a)(i), 12

F156 Word in s. 200(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(6)(a)(ii), 12

F157 Word in s. 200(3) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(6)(b), 12

201 Pre-conditions for making election under section 202 U.K.

(1) Conditions A to E are the pre-conditions for the purposes of section 202.

(2) Condition A is that both of the affected persons are companies.

(3) Condition B is that 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.

(4) Condition C is that 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 (see section 216).

(5) Condition D is that the actual provision is made or imposed by means of a series of transactions which include—

(a) [F158 borrowing (“the relevant borrowing”)] by one of the affected persons F159 ..., and

(b) the provision of a guarantee by the other affected person.

(6) Condition E is that the capital market condition is met (see section 204).

F160 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F160 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F160 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F158 Words in s. 201(5)(a) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(7)(a)(i), 12

F159 Words in s. 201(5)(a) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(7)(a)(ii), 12

F160 S. 201(7)-(9) omitted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by virtue of Finance Act 2026 (c. 11), Sch. 6 paras. 11(7)(b), 12

202 Election, in guarantee case, to pay tax rather than make balancing payments U.K.

(1) If each of the pre-conditions (see section 201) is met, the disadvantaged person may make an election—

(a) to make no balancing payment within section 198 to the advantaged person in connection with section 147(3) or (5) applying because of [F161 section 153A] in relation to the relevant [F162 borrowing] in a chargeable period, but

(b) instead, to undertake sole responsibility for discharging the advantaged person's liability to tax for that period so far as resulting from section 147(3) or (5) applying because of [F161 section 153A] in relation to the relevant [F162 borrowing].

(2) Section 203 contains provision about the making and effect of elections under this section.

(3) In this section, the following expressions have the meaning given by section 201—

• “the advantaged person”,

• “the disadvantaged person”, and

• “the relevant [F163 borrowing]”.

Textual Amendments

F161 Words in s. 202(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(8)(a)(i), 12

F162 Word in s. 202(1) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(8)(a)(ii), 12

F163 Word in s. 202(3) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(8)(b), 12

203 Elections under section 200 or 202 U.K.

(1) In this section “election” means election under section 200 or 202.

(2) An election must be made by being included (whether by amendment or otherwise) in the disadvantaged person's company tax return for the chargeable period in which the relevant [F164 borrowing first occurs].

(3) An election is irrevocable.

(4) An election has effect in relation to each of the affected persons for the chargeable period in which the relevant [F165 borrowing first occurs] and all subsequent chargeable periods.

(5) An election is of no effect if the Commissioners for Her Majesty's Revenue and Customs give the disadvantaged person a notice refusing to accept the election.

(6) A notice under subsection (5) may be given only after a notice of enquiry in respect of the company tax return containing the election has been given to the disadvantaged person.

(Paragraph 24 of Schedule 18 to FA 1998 makes provision about notices of enquiry in respect of company tax returns.)

(7) If an election has effect in relation to an accounting period of the advantaged person, the tax mentioned in subsection (1)(b) of the section under which the election is made—

(a) is recoverable from the disadvantaged person as if it were an amount of corporation tax due and owing from that person, and

(b) is not recoverable from the advantaged person.

(8) In this section—

• “the advantaged person”, “the disadvantaged person” and “the relevant [F166 borrowing]”—

  (a)

  in relation to an election under section 200, have the meaning given by section 199, and

  (b)

  in relation to an election under section 202, have the meaning given by section 201, and

• “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to FA 1998, as read with paragraph 4 of that Schedule.

(9) For the purposes of subsections (2) and (4), if the relevant [F167 borrowing first occurred] in a chargeable period beginning before 1st April 2004 it is to be treated as if it had [F168 first borrowed] in the chargeable period beginning on that date.

Textual Amendments

F164 Words in s. 203(2) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(9)(a), 12

F165 Words in s. 203(4) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(9)(b), 12

F166 Word in s. 203(8) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(9)(c), 12

F167 Words in s. 203(9) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(9)(d)(i), 12

F168 Words in s. 203(9) substituted (with effect in accordance with Sch. 6 para. 12 of the amending Act) by Finance Act 2026 (c. 11), Sch. 6 paras. 11(9)(d)(ii), 12

204 Meaning of “capital market condition” in sections 199 and 201 U.K.

(1) For the purposes of section 199(6) or 201(6), the capital market condition is met if—

(a) the actual provision forms part of a capital market arrangement,

(b) the capital market arrangement involves the issue of a capital market investment,

(c) the securities that represent the capital market investment are issued wholly or mainly to independent persons, and

(d) the total value of the capital market investments made under the capital market arrangement is at least £50 million.

(2) In this section—

• “capital market arrangement” has the same meaning as in section 72B(1) of the Insolvency Act 1986 (see paragraph 1 of Schedule 2A to that Act),

• “capital market investment” has the same meaning as in section 72B(1) of the Insolvency Act 1986 (see paragraphs 2 and 3 of Schedule 2A to that Act), and

• “independent person” means a person—

  (a)

  who is not the disadvantaged person, and

  (b)

  who does not have a participatory relationship with either of the affected persons.

(3) In subsection (2) “the disadvantaged person”—

(a) for the purposes of the application of this section in relation to section 199(6) has the meaning given by section 199(4), and

(b) for the purposes of the application of this section in relation to section 201(6) has the meaning given by section 201(4).

(4) For the purposes of subsection (2), a person (“A”) who is a company has a “participatory relationship” with one of the affected persons (“B”) if—

(a) one of A and B 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 A and B.

CHAPTER 7 U.K. Oil-related ring-fence trades

205 Provision made or imposed between ring-fence trade and other activities U.K.

(1) Subsections (2) to (4) apply if—

(a) a person carries on an oil-related ring-fence trade (see section 206), and

(b) any provision is made or imposed by the person as between—

(i) the oil-related ring-fence trade, and

(ii) any other activities carried on by the person.

(2) Chapters 1 and 3 to 6 (read in accordance with Chapters 2 and 8) apply in relation to the provision as if—

(a) the oil-related ring-fence trade, and the person's other activities, were carried on by two different persons,

(b) the provision were made or imposed as between those two persons by means of a transaction,

(c) those two persons were both controlled by the same person at the time when the provision was made or imposed, and

(d) a potential advantage in relation to United Kingdom taxation were conferred by the provision on each of those two persons.

(3) Subsection (2) has effect subject to subsection (4).

(4) Chapters 1 and 3 to 6 apply in relation to the provision only if the effect of their applying is—

(a) that a larger amount is taken for tax purposes to be the amount of the profits of the oil-related ring-fence trade for any chargeable period, or

(b) that a smaller amount (including nil) is taken for tax purposes to be the amount for any chargeable period of any losses of the oil-related ring-fence trade.

(5) In subsection (4)(a), the reference to a larger amount includes, if there would not otherwise have been profits, an amount of more than nil.

206 Meaning of “oil-related ring-fence trade” in sections 205 and 218 U.K.

(1) This section has effect for the interpretation of—

(a) section 205, and

(b) in Part 5, section 218(2)(f).

(2) Activities carried on by a person are an “oil-related ring-fence trade” carried on by that person if subsection (3) or (4) applies to the activities.

(3) This subsection applies to the activities if—

(a) they are carried on by the person as part of a trade, and

(b) in accordance with section 16(1) of ITTOIA 2005 or section 279 of CTA 2010 (oil-related activities), they are treated for any tax purposes as a separate trade distinct from all other activities carried on by the person as part of the trade.

(4) This subsection applies to the activities if—

(a) they are carried on by the person as a trade, and

(b) in accordance with section 16(1) of ITTOIA 2005 or section 279 of CTA 2010 they would, if the person did carry on any other activities as part of the trade, be treated for any tax purposes as a separate trade distinct from all other activities carried on by the person as part of the trade.

[F169 206A Modification of basic rule where allowances restricted for certain expenditure U.K.

(1) This section applies where—

(a) in a case to which section 165A(1) of CAA 2001 (restriction of allowances for decommissioning expenditure) applies, R's available qualifying expenditure is restricted under section 165B(2) or 165C of that Act, or

(b) in a case to which section 416ZC(1) of that Act (restriction of allowances for expenditure on site restoration) applies, R's qualifying expenditure is restricted under section 416ZD(2) or section 165C as applied by section 416ZD(4)(a) of that Act.

(2) In calculating for tax purposes S's profits and losses in relation to the service provided by S to R, the amount which S is required to bring into account is an amount equal to R's expenditure (restricted as mentioned in subsection (1)(a) or (b)).

(3) Section 147(3) and (5) do not apply to the extent that they are inconsistent with subsection (2).

(4) In this section “R” and “S” have the meaning given by section 165A or 416ZC of CAA 2001 (as the case may be).]

Textual Amendments

F169 S. 206A inserted (with effect in accordance with Sch. 32 para. 16 of the amending Act) by Finance Act 2013 (c. 29), Sch. 32 para. 14

CHAPTER 8 U.K. Supplementary provisions and interpretation of Part

Unit trusts U.K.

207 Application of Part to unit trusts U.K.

(1) This Part has effect as follows.

(2) As if a unit trust scheme were a company that is a body corporate.

(3) As if the rights of the unit holders under a unit trust scheme were shares in the company that the scheme is deemed to be.

(4) As if rights and powers of a person in the capacity of a person entitled to act for the purposes of a unit trust scheme were rights and powers of the scheme.

(5) As if provision made or imposed as between—

(a) a person in the capacity of a person entitled to act for the purposes of a unit trust scheme, and

(b) another person,

were made or imposed as between the scheme and that other person.

F170 ... U.K.

Textual Amendments

F170 S. 208 cross-heading omitted (18.3.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 para. 20(1) (with Sch. 6 para. 20(2))

F171 208 The determinations which require the Commissioners' sanction U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F171 Ss. 208-211 omitted (18.3.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 para. 20(1) (with Sch. 6 para. 20(2))

F171 209 Determinations exempt from requirement for Commissioners' sanction U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F171 Ss. 208-211 omitted (18.3.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 para. 20(1) (with Sch. 6 para. 20(2))

F171 210 The requirement for the Commissioners' sanction U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F171 Ss. 208-211 omitted (18.3.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 para. 20(1) (with Sch. 6 para. 20(2))

F171 211 Restriction of right to appeal against Commissioners' approval U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F171 Ss. 208-211 omitted (18.3.2026) by virtue of Finance Act 2026 (c. 11), Sch. 6 para. 20(1) (with Sch. 6 para. 20(2))

Appeals U.K.

212 Appeals U.K.

(1) The appeals within this subsection are—

(a) an appeal under section 31 of, or Schedule 1A to, TMA 1970,

(b) an appeal under paragraph 34(3) of Schedule 18 to FA 1998 against an amendment of a company's return, and

(c) an appeal under paragraph 48 of that Schedule against a discovery assessment or a discovery determination.

(2) Subsection (3) applies so far as the question in dispute on an appeal within subsection (1)—

(a) is or involves a determination of whether this Part has effect, and

(b) relates to any provision made or imposed as between two persons each of whom is within the charge to income tax or corporation tax in respect of profits arising from the relevant activities (see section 216).

(3) If this subsection applies—

(a) each of the persons as between whom the actual provision was made or imposed is entitled to be a party in any proceedings,

(b) the tribunal is to determine the question separately from any other question in the proceedings, and

(c) the tribunal's determination on the question has effect as if made in an appeal to which each of those persons was a party.

(4) In subsection (1)(c)—

• “discovery assessment” means a discovery assessment under paragraph 41 of Schedule 18 to FA 1998 (which includes a discovery assessment under that paragraph as applied by paragraph 52 that Schedule), and

• “discovery determination” means a discovery determination under paragraph 41 of that Schedule.

Effect of Part on capital allowances and chargeable gains U.K.

213 Capital allowances U.K.

(1) Nothing in this Part is to be read as affecting the calculation of the amount of any capital allowance or balancing charge made under CAA 2001.

(2) Subsection (1) does not apply in relation to claims under section 174.

[F172 (3) But a claim under section 174 may not be made if the claim would affect the operation of sections 165A to 165E or 416ZC to 416ZE of CAA 2001.]

Textual Amendments

F172 S. 213(3) inserted (with effect in accordance with Sch. 32 para. 16 of the amending Act) by Finance Act 2013 (c. 29), Sch. 32 para. 15

214 Chargeable gains U.K.

(1) Nothing in this Part is to be read as affecting the calculation in accordance with TCGA 1992 of the amount of any chargeable gain or allowable loss.

(2) Nothing in this Part requires the profits and losses of any person to be calculated for tax purposes as if, in the person's case, instead of income or losses to be brought into account in connection with the taxation of income, there were gains or losses to be brought into account in accordance with TCGA 1992.

(3) Subsections (1) and (2) do not apply in relation to claims under section 174.

Adjustments U.K.

215 Manner of making adjustments to give effect to Part U.K.

Any adjustments required to be made under this Part may be made by way of discharge or repayment of tax, by the modification of any assessment or otherwise.

Definitions U.K.

216 Meaning of “the relevant activities” U.K.

(1) In this Part “the relevant activities”, in relation to a person (“A”) who is one of the persons as between whom any provision is made or imposed, means activities that—

(a) are within subsection (2), and

(b) are not within subsection (3).

(2) The activities within this subsection are those of A's activities that comprise the activities in the course of which, or with respect to which, that provision is made or imposed.

(3) The activities within this subsection are any of A's activities carried on—

(a) separately from the activities mentioned in subsection (2), or

(b) for the purposes of a different part of A's business.

217 Meaning of “control” and “firm” U.K.

(1) References in this Part to a person controlling a body corporate or firm are to be read in accordance with section 1124 of CTA 2010.

(2) Subsection (1) has effect subject to subsection (4) and section 205(2).

(3) Subsection (4) applies if—

(a) the actual provision is made or imposed by or in relation to a sale of oil,

(b) the oil sold is oil which has been, or is to be, extracted under rights exercisable by a company (“the producer”) which, although it may be the seller, is not the buyer, and

(c) at the time of the completion of the sale or when possession of the oil passes, whichever is the earlier, at least 20% of the producer's ordinary share capital is owned directly or indirectly by one or more of the buyer and the companies (if any) that are linked to the buyer.

(4) If this subsection applies, this Part has effect in relation to the actual provision as if—

(a) the buyer and the seller, and

(b) the producer, if it is not the seller,

were all controlled by the same person at the time of the making or imposition of the actual provision.

(5) For the purposes of subsection (3)(c), two companies are “linked” if—

(a) one is under the control of the other, or

(b) both are under the control of the same person or persons.

(6) For the purposes of subsection (3)—

(a) any question whether ordinary share capital is owned directly or indirectly by a company is to be decided as for Chapter 3 of Part 24 of CTA 2010, and

(b) rights to extract oil are to be taken to be exercisable by a company even if they are exercisable by that company only jointly with another company or two or more other companies.

(7) In this section “oil” includes any mineral oil or relative hydrocarbon oil, as well as natural gas.

(8) In this Part persons carrying on a trade, profession or other business in partnership are referred to collectively as a “firm”.