Finance Act 1998

24After paragraph 19 of Schedule 24 to the Taxes Act 1988 there shall be inserted—

“Transfer pricing

20(1)Sub-paragraph (2) of paragraph 5 of Schedule 28AA (no potential UK tax advantage where both parties are within charge to income or corporation tax etc) shall be assumed not to apply in any case where, apart from that sub-paragraph (and on the assumption in paragraph 1(1) above),—

(a)paragraph 6 of that Schedule would apply; and

(b)the company would be the disadvantaged person for the purposes of that paragraph.

(2)Schedule 28AA (transfer pricing etc: provision not at arm’s length) shall be assumed not to apply in any case where, apart from this sub-paragraph,—

(a)the actual provision would (on the assumption in paragraph 1(1) above) confer a potential advantage in relation to United Kingdom taxation on the company;

(b)the other affected person would be a company resident outside the United Kingdom; and

(c)each accounting period of that company which falls wholly or partly within the accounting period in question is one as regards which—

(i)an apportionment under section 747(3) falls to be made; or

(ii)no such apportionment falls to be made by virtue of the period being an ADP exempt period.

(3)In any case where—

(a)by virtue of sub-paragraph (2) above, Schedule 28AA is assumed not to apply, and

(b)the actual provision mentioned in paragraph (a) of that sub-paragraph involves (on the assumption in paragraph 1(1) above) any such interest or other distribution out of assets as would constitute a distribution for the purposes of the Corporation Tax Acts by virtue of paragraph (da) of section 209(2),

that interest or distribution out of assets shall be assumed not to constitute such a distribution by virtue of that paragraph.”