Section 164A | UK to UK Exemption ^F1

(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.