Part 4Transfer pricing

CHAPTER 6Balancing payments

199Pre-conditions for making election under section 200

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 a security (the “relevant security”).

6

Condition E is that the capital market condition is met (see section 204).

7

In subsections (5) and (8)(a) “security” includes securities not creating or evidencing a charge on assets.

8

For the purposes of subsection (5), any—

a

interest payable by a company on money advanced without the issue of a security for the advance, or

b

other consideration given by a company for the use of money so advanced,

is to be treated as if payable or given in respect of a security issued for the advance by the company, and the reference in subsection (5) to a security is to be read accordingly.