Schedule A1 | Assessment of unassessed transfer pricing profits: partnerships and Lloyd’s syndicates

From legislation.gov.uk

Part 1Corporate partner’s unassessed transfer pricing profits

(1)For the purposes of this Part of this Act, a company has unassessed transfer pricing profits as a corporate partner of a partnership in relation to a return period if—

(a)the company is or has been a partner in the partnership;

(b)a partnership return in respect of the partnership has been made and delivered in respect of the return period,

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

(d)the partnership’s profits and losses calculated under section 1259 of CTA 2009 for one or more relevant accounting periods are subject to a transfer pricing requirement in relation to that provision,

(e)a share of the partnership’s profit or loss calculated under section 1259 of CTA 2009 for one or more of those relevant accounting periods is brought into account in calculating the company’s profit or loss for one or more accounting periods for corporation tax purposes, and

(f)the transfer pricing requirement was not reflected, or is not wholly reflected, in the partnership’s profits and losses that were—

(i)included in the partnership return, and

(ii)calculated under section 1259 of CTA 2009.

(2)For the purposes of this Part of this Act, the unassessed transfer pricing profits of the company for an accounting period are the profits that would be brought into account in calculating the company’s profit or loss for that accounting period for corporation tax purposes, if the amount of the partnership’s profit calculated under section 1259 of CTA 2009 for each of the relevant accounting periods mentioned in sub-paragraph (1)(e) was taken to be the amount of the partnership’s unassessed transfer pricing profits for that relevant accounting period (and no other amount).

(3)For the purposes of sub-paragraph (2), the partnership’s unassessed transfer pricing profits for a relevant accounting period are—

(a)to the extent that the transfer pricing requirement requires profits that are not reflected in the partnership return to be brought into account in calculating the partnership’s profits or losses calculated under section 1259 of CTA 2009 for the relevant accounting period, those profits, and

(b)to the extent that the transfer pricing requirement requires losses that are reflected in the partnership’s return to not be brought into account in calculating the partnership’s profits or losses calculated under section 1259 of CTA 2009 for the relevant accounting period, the profits that would, if they were brought into account in that calculation, produce the same result as not bringing into account those losses.

(4)The partnership’s profits and losses calculated under section 1259 of CTA 2009 for a relevant accounting period are subject to a transfer pricing requirement in relation to the provision if—

(a)the partnership’s profits and losses calculated under section 1259 of CTA 2009 for the relevant accounting period are required to be calculated as if the arm’s length provision (within the meaning of Part 4) had been made or imposed instead of the provision, or

(b)an adjustment to the partnership’s profits and losses calculated under section 1259 of CTA 2009 for the relevant accounting period that result from the provision is required by virtue of any other enactment where, but for that enactment, paragraph (a) would have applied in relation to the provision.

(5)In this paragraph—

(a)for the purposes of sub-paragraph (1)(a), a company that is or has been a partner in the partnership includes a company that is or has been an indirect partner in the partnership for the purposes of section 12AA of TMA 1970, and

(b)accordingly, the reference in sub-paragraph (2) to the partnership’s profits or losses being brought into account in calculating the profit or loss of a company that is or has been a partner in a partnership includes those profits or losses being brought into account indirectly.

(6)In Parts 1 to 3 of this Schedule—

(a)“partnership return” means a return in pursuance of a notice under section 12AA(2) or (3) of TMA 1970 (and where the return has been amended, reference to the return is to that return as amended);

(b)“relevant corporate partner”, in relation to a partnership and a return period, means a company which has unassessed transfer pricing profits for one or more accounting periods as a corporate partner of the partnership in relation to the return period by virtue of this paragraph (and references to the relevant corporate partner’s unassessed transfer pricing profits are to be construed accordingly);

(c)“return period” means the period in respect of which a partnership return is required pursuant to the notice under section 12AA(2) or (3) of TMA 1970;

(d)“relevant accounting period”, in relation to a partnership return, means an accounting period of the firm (within the meaning of Part 17 of CTA 2009) ending within the return period.

Part 2Conditions for being assessed

(1)In its application to the unassessed transfer pricing profits which a company has for one or more accounting periods as a corporate partner of a partnership in relation to a return period by virtue of paragraph 1, Chapter 2 of this Part of this Act has effect as if—

(a)references to the other party were to the other person mentioned in paragraph 1(1)(c);

(b)the reference in section 217D(1) to the company were a reference to the partnership;

(c)where the partnership has more than one relevant corporate partner in relation to the return period, for section 217D(2) there were substituted—

(2)“The underlying corporation tax amount” is the sum of the amounts determined in relation to each relevant corporate partner by multiplying the amount of the relevant corporate partner’s unassessed transfer pricing profits by the underlying corporation tax rate.

;

(d)the reference in section 217D(3) to relevant tax charged (in any period) on profits that correspond to the unassessed transfer pricing profits were to the relevant corporate partners’ proportion of relevant tax charged (in any period) on profits that correspond to the partnership’s unassessed transfer pricing profits within the meaning of paragraph 1(3) of this Schedule.

(2)In sub-paragraph (1)(d) “the relevant corporate partners’ proportion” means the proportion that—

(a)where the partnership has one relevant corporate partner, the relevant corporate partner’s unassessed transfer pricing profits, or

(b)where the partnership has more than one relevant corporate partner, the sum of each relevant corporate partner’s unassessed transfer pricing profits,

bears to the partnership’s unassessed transfer pricing profits within the meaning of paragraph 1(3) of this Schedule.

Part 3Assessment

(1)Where a designated officer considers that a company has unassessed transfer pricing profits for one or more accounting periods as a corporate partner of a partnership in relation to a return period by virtue of paragraph 1, a designated officer may issue a preliminary notice to the representative partner.

(2)A preliminary notice issued under this paragraph must—

(a)set out the officer’s best judgement of the amount of the partnership’s unassessed transfer pricing profits (within the meaning of paragraph 1(3));

(b)state the return period to which the partnership’s unassessed transfer pricing profits relate;

(c)set out the officer’s best judgement of the amount of the unassessed transfer pricing profits of all of the relevant corporate partners;

(d)state the accounting periods to which the unassessed transfer pricing profits of all of the relevant corporate partners relate;

(e)set out the basis on which the officer considers that the conditions mentioned in section 217C(1) are met.

(3)A preliminary notice under this paragraph may not be issued in respect of a return period more than 4 years after the end of that period.

(4)In this Part of this Schedule, the “representative partner” means the partner who made and delivered the partnership return to which the unassessed transfer pricing profits relate or that partner’s successor within the meaning of TMA 1970 (see section 12AA(11) and (12) of that Act).

(4)Section 217G has effect in relation to a preliminary notice issued to the representative partner under paragraph 3 as it has effect in relation to a preliminary notice issued to a company but as if the reference in subsection (4) of that section to the other party were to the other person mentioned in paragraph 1(1)(c).

(1)This paragraph applies where—

(a)a designated officer has issued a preliminary notice to the representative partner under paragraph 3 in relation to a return period of the partnership, and

(b)a designated officer has considered any representations made by the representative partner in accordance with section 217G (as applied by paragraph 4).

(2)A designated officer may assess the unassessed transfer pricing profits of all of the relevant corporate partners of the partnership in relation to the return period to corporation tax at the UTPP rate.

(3)For the purposes of sub-paragraph (2), a designated officer assesses the unassessed transfer pricing profits of all of the relevant corporate partners of the partnership by—

(a)where the partnership has one relevant corporate partner in relation to the return period, assessing the relevant corporate partner on the relevant corporate partner’s unassessed transfer pricing profits for the accounting period or periods stated in the preliminary notice;

(b)where the partnership has more than one relevant corporate partner in relation to the return period, assessing each relevant corporate partner on the relevant corporate partner’s unassessed transfer pricing for the accounting periods stated in the preliminary notice, on the same day.

(4)Notices of any assessments under this paragraph issued to a relevant corporate partner must also be issued to the representative partner.

(5)Subsections (3) to (5) of section 217H have effect in relation to an assessment under this paragraph as they have effect in relation to an assessment under section 217H but as if—

(a)the reference in subsection (4) to the other party were to the other person mentioned in paragraph 1(1)(c),

(b)references to paragraph 33 of Schedule 18 to FA 1998 were to section 28B of TMA 1970, and

(c)the reference in subsection (5) to the company tax return for the accounting period mentioned in subsection (1)(a) were to the partnership return for the return period mentioned in sub-paragraph (1)(a).

(1)This paragraph applies where a designated officer assesses the unassessed transfer pricing profits of all of the relevant corporate partners of a partnership in relation to a return period under paragraph 5.

(2)At any time before the end of the period for amendments, the representative partner may amend the partnership return for the return period so that the calculation of the partnership’s profits and losses under section 1259 of CTA 2009 more fully reflects the transfer pricing requirement to which the unassessed transfer pricing profits relate.

(3)In this Part of this Schedule “the period for amendments” means the period of 15 months beginning with the day after the day on which the designated officer assesses the unassessed transfer pricing profits of all of the relevant corporate partners under paragraph 5.

(4)If, before the end of the period of 15 months referred to in sub-paragraph (3), a designated officer and the representative partner agree (in writing) that the period for amendments is to terminate, the period ends when that agreement is made.

(5)An amendment under sub-paragraph (2) may not be made in the last 21 days of the period for amendments, unless the period for amendments ends by agreement in accordance with sub-paragraph (4).

(6)Section 12AD(3) of TMA 1970 (amendment not to take effect during enquiry) does not apply in relation to an amendment made under sub-paragraph (2).

(2)If at any time before the end of the period for amendments a designated officer is satisfied that the total corporation tax charged on any relevant corporate partner’s unassessed transfer pricing profits for an accounting period by an assessment under paragraph 5 is excessive, the designated officer must amend or withdraw the assessment accordingly.

(3)If at any time (whether or not before the end of the period for amendments) a designated officer is satisfied that one or more of the conditions mentioned in section 217C(1) do not apply in respect of unassessed transfer pricing profits so assessed, the designated officer must—

(a)withdraw all of the assessments made under paragraph 5, or

(b)amend all of the assessments to assess the unassessed transfer pricing profits to corporation tax not at the UTPP rate.

(4)Where an assessment is amended under sub-paragraph (2) or (3) any tax overpaid must be repaid.

(5)If a designated officer is satisfied at any time before the end of the period for amendments that the total corporation tax charged on any relevant corporate partner’s unassessed transfer pricing profits for the period is insufficient, the designated officer may amend the assessment accordingly.

(6)An amendment under sub-paragraph (5) may not be made in the last 30 days of the period for amendments, unless the period for amendments ends by agreement in accordance with paragraph 6(4).

(7)Where an assessment is withdrawn or amended under this paragraph, notice of the withdrawal or amendment must be given to the representative partner.

(1)Section 217K applies where a designated officer has assessed the unassessed transfer pricing profits of all of the relevant corporate partners of a partnership in relation to a return period under paragraph 5 or paragraph 7(5) as it applies where a designated officer has assessed a company’s unassessed transfer pricing profits under section 217H or section 217J(5) but as if—

(a)references to the company were to the representative partner;

(b)where the partnership has more than one relevant corporate partner in relation to the return period—

(i)in subsection (2)(a) after “determination” there were inserted “in relation to each assessment”;

(ii)references to the assessment being finalised were to all of the assessments being finalised;

(iii)the reference in subsection (3)(b)(i) to the assessment were to the assessments;

(iv)the references in subsection (3)(b)(ii) and (iii) to an appeal against the assessment were to all appeals against the assessments;

(c)references to the other party were to the other person mentioned in paragraph 1(1)(c);

(d)the reference in subsection (3)(b) to section 217M(2) were to paragraph 10(3);

(e)the reference in subsection (9)(b)to relevant tax charged (in any period) on profits that correspond to the unassessed transfer pricing profits were to the relevant corporate partner’s share of relevant tax charged (in any period) on profits that correspond to the partnership’s unassessed transfer pricing profits within the meaning of paragraph 1(3).

(2)In sub-paragraph (1)(e) “the relevant corporate partner’s share” means the share of the partnership’s profits or losses calculated under section 1259 of CTA 2009 for all of the relevant accounting periods mentioned in paragraph 1(1)(e) that is brought into account in calculating the relevant corporate partner’s profit or loss for any accounting period for corporation tax purposes.

(2)A relevant closure notice may not be issued under section 28B of TMA 1970 at any time before the end of the period for amendments.

(3)Accordingly, a tribunal direction given under section 28B of TMA 1970 in relation to a relevant closure notice has no effect until the period for amendments has ended.

(4)A relevant closure notice issued after the end of the period for amendments may not make any amendments to the partnership return which have the effect that the calculation of the partnership’s profits and losses under section 1259 of CTA 2009 more fully reflects the transfer pricing requirement to which the unassessed transfer pricing profits relate.

(5)In this paragraph a “relevant closure notice” means a partial or final closure notice in relation to an enquiry into the partnership return for the return period mentioned in sub-paragraph (1).

(1)An appeal against the assessment of the unassessed transfer pricing profits of a relevant corporate partner of a partnership in relation to a return period under this Schedule may only be made—

(a)by the representative partner, and

(b)where the partnership has more than one relevant corporate partner in relation to the return period, by the representative partner appealing at the same time against the assessments of the unassessed transfer pricing profits of all of the relevant corporate partners.

(2)The representative partner in the partnership may only bring an appeal against such an assessment where—

(a)all of the relevant corporate partners have paid (in full) the corporation tax charged on the profits assessed other than any amount the payment of which has been postponed in accordance with paragraph 8, and

(b)the period for amendments has ended.

(3)Notice of an appeal must be given before the end of the period of 30 days beginning with—

(a)the end of the period for amendments, or

(b)in a case where paragraph 6(4) applies, the day after the day on which the period for amendments ends,

(and accordingly paragraph 48(2)(b) of Schedule 18 to FA 1998 does not apply).

(4)Sub-paragraphs (5) and (6) apply where, on an appeal against an assessment of a relevant corporate partner’s unassessed transfer pricing profits, the tribunal decides that the company is overcharged by the assessment as a result of one or more of the conditions mentioned in section 217C(1) not applying in respect of unassessed transfer pricing profits so assessed.

(5)The tribunal may, in addition to any other powers exercisable by the tribunal in those circumstances, reduce the tax charged on the amount assessed to assess the unassessed transfer pricing profits to corporation tax not at the UTPP rate.

(6)But where the partnership has more than one relevant corporate partner in relation to the return period the tribunal may only exercise the power in sub-paragraph (5) if the tribunal exercises the power on the appeal against the assessment of the unassessed transfer pricing profits of each relevant corporate partner.

(11)In its application in relation to an appeal against the assessment of the unassessed transfer pricing profits of a relevant corporate partner of a partnership in relation to a return period in respect of which the partnership has more than one relevant corporate partner, section 217N has effect as if after subsection (2) there were inserted—

(3)But the review may only conclude that the assessment is to be amended as described in subsection (2) if the review concludes that the assessment of each of the relevant corporate partner’s unassessed transfer pricing profits is to be amended in that way.

(1)Where the representative partner gives notice of appeal against an assessment of the unassessed transfer pricing profits of a relevant corporate partner of a partnership in relation to a return period, references in section 54 of TMA 1970 to an agreement that the assessment should be varied are to be read as including a reference to an agreement that the assessment should be amended to assess the unassessed transfer pricing profits to corporation tax not at the UTPP rate.

(2)But where the partnership has more than one relevant corporate partner in relation to the return period, an agreement that the assessment should be amended as described in sub-paragraph (1) may only be made if an agreement of that kind is made in relation to the assessment of each of the relevant corporate partner’s unassessed transfer pricing profits.

Part 4Application to Lloyd’s syndicates

(1)Parts 1 to 3 of this Schedule apply to a company as a corporate member of a syndicate as they apply to a company as a corporate partner of a partnership as if references to—

(a)partnership were to syndicate;

(b)corporate partner or corporate partners were to corporate member or corporate members;

(c)partnership return were to syndicate return;

(d)return period were to underwriting year;

(e)the representative partner were to the syndicate’s managing agent;

(f)“calculated under section 1259 of CTA 2009” were omitted.

(2)The application of Parts 1 to 3 of this Schedule to a corporate member of a syndicate is also subject to the modifications set out in paragraph 14.

(3)For the purposes of this Part of this Schedule—

(a)“corporate member”, in relation to a syndicate—

(i)means a body corporate which is a member of Lloyd’s and is or has been an underwriting member, and

(ii)where the body corporate is a partnership, includes any company that is or has been a partner in that partnership (and for these purposes, partner includes any person who is or has been an indirect partner in the partnership within the meaning of section 12AA of TMA 1970);

(b)“syndicate” and “underwriting year” have the same meanings as in Chapter 5 of Part 4 of FA 1994 (see section 230 of that Act);

(c)“managing agent” and “syndicate return” have the same meanings as in regulation 4 of the Lloyd’s Underwriters (Tax) Regulations 2005 (S.I. 2005/3338).

(1)Paragraph 1 (unassessed transfer pricing profits) has effect as if—

(a)references to relevant accounting period, one or more relevant accounting periods, one or more of those relevant accounting periods and each of the relevant accounting periods mentioned in sub-paragraph (1)(e) were to the underwriting year;

(b)the references in sub-paragraph (1)(a) and (5)(b) to partner were to corporate member;

(c)in sub-paragraph (2) after “brought into account”, in the first place it occurs, there were inserted “during the period for amendments (see paragraph 6)”;

(d)sub-paragraph (5)(a) (and the “accordingly” at the start of sub-paragraph (5)(b)) and sub-paragraphs (6)(a), (c) and (d) were omitted.

(2)Paragraph 3 (preliminary notices) has effect as if sub-paragraph (4) were omitted.

(3)Paragraph 5 (assessment) has effect as if sub-paragraph (5)(b) were omitted.

(4)Paragraph 6 (amendment of return) has effect as if—

(a)after sub-paragraph (2) there were inserted—

(2A)Where the syndicate return is amended under sub-paragraph (2), a designated officer must, by notice to each of the relevant corporate members, amend the corporate member’s company tax return so as to give effect to the amendment of the syndicate return.

;

(b)in sub-paragraph (6), the reference to section 12AD(3) of TMA 1970 were to paragraph 31(3) of Schedule 18 to FA 1998.

(5)Paragraph 8 (no postponement except before assessment is finalised for tax on same profits) has effect as if the reference in sub-paragraph (2) to all of the relevant accounting periods mentioned in paragraph 1(1)(e) were to the underwriting year.

(6)Paragraph 9 has effect as if—

(a)the reference in sub-paragraph (2) to section 28B of TMA 1970 were to paragraph 32 of Schedule 18 to FA 1998;

(b)the reference in sub-paragraph (3) to section 28B of the TMA 1970 were to paragraph 33 of Schedule 18 to FA 1998;

(c)for sub-paragraph (4) there were substituted—

(4)Where a relevant closure notice issued after the end of the period for amendments amends the syndicate return to more fully reflect the transfer pricing requirement to which the unassessed transfer pricing profits relate, the amendment may not be given effect—

(a)by amending any relevant corporate member’s tax return in a closure notice, or

(b)otherwise by an assessment to corporation tax on any of the relevant corporate members.