817U Interpretation

Summary

This section is concerned with the interpretation of certain terms used in this Chapter.

Details

Definitions

(1) “arrangement” has the same meaning as in Part 35A Transfer Pricing.

“associated entities” are defined separately in subsection (3).

“controlled foreign company charge” has the same meaning as it has in Part 35B, Controlled Foreign Company provisions.

“domestic tax” means income tax, corporation tax or capital gains tax.

“EEA Agreement” means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993.

“EEA State” means a state which is a contracting party to the EEA Agreement.

“entity” has the same meaning as it has in Part 35C, Hybrid Mismatches.

“excluded payment” means a payment, or a portion thereof, made by a company to the extent that it is reasonable to consider that—

• an amount of income, profits or gains arising from the payment is within the charge to—
1. supplemental tax,
2. foreign tax at a nominal rate greater than zero per cent, or
3. domestic tax, other than as applied by this Chapter.

or

• the payment is made out of an amount of income, profits or gains where—
1. that income, profits or gains are within the charge to foreign tax at a nominal rate greater than zero per cent, and
2. in calculating the amount of foreign tax to which that income, profits or gains are subject, no account is taken of that payment or any amount in respect of that payment,

and

includes a payment which would be a payment to which the above paragraphs apply but for the fact that the entity which would be within the charge to tax in respect of that payment, or in respect of the income, profits or gains out of which the payment is made, is a pension fund, government body or other entity, resident in a territory other than a specified territory, that, under the laws of that territory, is exempted from tax which generally applies to profits, income or gains in that territory.

“foreign tax” has the same meaning as it has in Part 35C, Hybrid Mismatches.

“permanent establishment”, in respect of a company, means a fixed place of business situated in a territory other than where that company is resident, through which the business of a company is wholly or partly carried on.

“qualified IIR”, “qualified UTPR”, and “qualified domestic top-up tax” have the same meaning, respectively, as they have in Part 4A, Pillar Two provisions.

“relevant distribution” has the same meaning as it has in Chapter 8A of Part 6, Dividend withholding tax.

“relevant Member State” means—

1. a Member State of the European Union, or
2. not being such a Member State, an EEA State.

“relevant payment” means a payment made by a company of an amount of interest or royalties which has been, or may be, in any accounting period, deducted, allowed or relieved in computing it’s or another company’s profits or losses for the purposes of corporation tax.

“royalty” means a payment of any kind for—

1. the use of, or the right to use—
   1. any copyright of literary, artistic or scientific work, including cinematograph films,
   2. any patent, trademark, design or model, plan, secret formula or process,
   or
2. information concerning industrial, commercial or scientific experience.

“specified territory” means a territory, other than a relevant Member State, which is a listed territory or a zero-tax territory.

“supplemental tax” means—

1. a qualified IIR,
2. a qualified UTPR,
3. a qualified domestic top-up tax, or
4. any other tax which is similar to any of the taxes referred to in paragraphs (a) to (c).

“tax period” has the same meaning as it has in section 835Z, Interpretation Part 35C, Hybrid Mismatches.

“zero-tax territory” means a territory that—

• generally subjects entities to tax at a rate of zero per cent on income, profits and gains, or
• does not generally subject entities, whether on a remittance basis or otherwise, to a tax on income, profits and gains,

other than in respect of an entity whose income, profits or gains are treated by that territory, or would be so treated but for an insufficiency of income, profits or gains, as arising or accruing to another entity.

(2) In this Chapter, “listed territory” has the same meaning as in section 835YA, non-cooperative jurisdictions, Part 35B Controlled Foreign Companies. Subject to the modification that references to ‘an accounting period beginning’ in section 835YA shall be read as references to ‘the making of a payment or distribution’.

(3) In this Chapter, two entities shall be “associated entities” in respect of each other where—

• one entity, directly or indirectly, possesses or is beneficially entitled to—
  • (3)(a)(i) where the other entity is an entity having share capital, more than 50 per cent of the issued share capital of the other entity, or
  • (3)(a)(ii) where the other entity is an entity not having share capital, an interest of more than 50 per cent of the ownership rights in the other entity,
• (3)(b) one entity, directly or indirectly, is entitled to exercise more than 50 per cent of the voting power in the other entity,
• (3)(c)(i) one entity (referred to as ‘the first-mentioned entity’), directly or indirectly, holds such rights as would—
  • (3)(c)(ii) where the other entity is a company, if the whole of the profits of that other entity were distributed, entitle the first-mentioned entity, directly or indirectly, to receive more than 50 per cent of the profits so distributed, or
  • (3)(d) where the other entity is an entity other than a company, if the share of the profits of that other entity to which the first-mentioned entity is entitled, directly or indirectly, is more than 50 per cent,
• (3)(e) one entity has definite influence in the management of the other entity, or
• there is another entity in respect of which the two entities are, in accordance with paragraph (a), (b), (c) or (d).

(4) For the purposes of subsection (3)(d), one entity (referred to as ‘the first-mentioned entity’) shall be considered to have definite influence in the management of another entity (referred to as ‘the second-mentioned entity’) where the first-mentioned entity has the ability to participate,

• on the board of directors or equivalent governing body of the second-mentioned entity,
• in the financial and operating policy decisions of the second-mentioned entity,

where that ability causes, or could cause, the affairs of the second-mentioned entity to be conducted in accordance with the wishes of the first-mentioned entity.

For the purposes of this Chapter, an entity shall be regarded as being a resident of a territory if—

• (5)(a) in a case where the territory is a territory with the government of which arrangements having the force of law by virtue of section 826(1) have been made, the entity is regarded as being a resident of that territory under those arrangements, and
• (5)(b) in any other case, the entity is by virtue of the law of a territory resident for the purposes of tax in that territory,

but where an entity is not resident in any territory in accordance with paragraph (a) or (b) it shall be regarded as being resident in the territory under whose laws it was created.

(6) A payment or distribution, or the relevant portion thereof, shall be treated as if it had been made to an entity or individual other than the direct recipient of the payment or distribution in certain circumstances. These circumstances are where a relevant payment or a relevant distribution is made to an entity or a permanent establishment (referred to as ‘the first-mentioned entity or permanent establishment’) and some or all of that payment or distribution is treated as arising or accruing to another entity or permanent establishment (referred to as ‘the second-mentioned entity or permanent establishment’) or an individual, under the tax law of the territory where—

• (6)(a) the first-mentioned entity or permanent establishment is resident or situated, as the case may be, and
• (6)(b) the second-mentioned entity or permanent establishment or such individual is resident or situated, as the case may be.

Relevant Date: Finance Act 2024