Taxation (International and Other Provisions) Act 2010
The following Parts contain provisions relating to international aspects of taxation—
Parts 2 and 3 (double taxation relief),
Parts 4 and 5 (transfer pricing and advance pricing agreements),
Part 6 (tax arbitrage),
Part 7 (tax treatment of financing costs and income), and
Part 8 (offshore funds).
Part 9 contains amendments of tax legislation to relocate enactments to appropriate places.
In particular, Part 9 contains amendments of TCGA 1992, ITTOIA 2005 and ITA 2007 that insert provisions relating to—
oil activities (see section 364 and Schedule 1),
alternative finance arrangements (see section 365 and Schedule 2),
leasing arrangements involving finance leases or loans (see section 367 and Schedule 3),
sale and lease-back etc (see section 368 and Schedule 4),
factoring of income etc (see section 369 and Schedule 5), and
UK representatives of non-UK residents (see section 370 and Schedule 6).
Part 10 contains provisions of general application (including definitions for the purposes of the Act).
For abbreviations used in this Act see section 373, and for defined expressions used in Parts 2 to 8 see Schedule 11.
If Her Majesty by Order in Council declares— those arrangements have effect.
that arrangements specified in the Order have been made in relation to any territory outside the United Kingdom with a view to affording relief from double taxation in relation to taxes within subsection (3), and
that it is expedient that those arrangements should have effect,
If arrangements have effect under subsection (1), they have effect in accordance with section 6.
The taxes are—
income tax,
corporation tax,
capital gains tax,
petroleum revenue tax, and
any taxes imposed by the law of the territory that are of a similar character to taxes within paragraphs (a) to (d).
In this Part “double taxation arrangements” means arrangements that have effect under subsection (1).
Section 2(1) gives effect to arrangements even if the arrangements include—
provision for relief from tax for periods before the passing of this Act, or
provision for relief from tax for periods before the making of the arrangements.
Section 2(1) gives effect to arrangements even if the arrangements include—
provision as to income that is not subject to double taxation,
provision as to chargeable gains that are not subject to double taxation, or
provision as to foreign-field consideration that is not subject to double taxation.
In subsection (2)(c) “foreign-field consideration” means consideration brought into charge to tax under section 12 of the Oil Taxation Act 1983 (charge to petroleum revenue tax on consideration in respect of United Kingdom use of a foreign field asset).
For the purposes of sections 2 and 3, any amount within subsection (2) is to be treated as having been payable.
An amount is within this subsection if it is an amount of tax that would have been payable under the law of a territory outside the United Kingdom but for a relief—
given under the law of the territory with a view to promoting industrial, commercial, scientific, educational or other development in a territory outside the United Kingdom, and
about which provision is made in double taxation arrangements.
References in sections 2 and 3 to double taxation are to be read in accordance with subsection (1).
If an Order under section 2 (“the later Order”) revokes an earlier Order under that section, the later Order may contain transitional provisions that appear to Her Majesty to be necessary or expedient.
An Order under section 2 is not to be submitted to Her Majesty in Council unless a draft of the Order has been laid before and approved by a resolution of the House of Commons.
Subject to this Part and Part 18 of ICTA, double taxation arrangements have effect in accordance with subsections (2) to (4) despite anything in any enactment.
Double taxation arrangements have effect in relation to income tax and corporation tax so far as the arrangements provide—
for relief from income tax or corporation tax,
for taxing income of non-UK resident persons that arises from sources in the United Kingdom,
for taxing chargeable gains accruing to non-UK resident persons on the disposal of assets in the United Kingdom,
for determining the income or chargeable gains to be attributed to non-UK resident persons,
for determining the income or chargeable gains to be attributed to agencies, branches or establishments in the United Kingdom of non-UK resident persons,
for determining the income or chargeable gains to be attributed to UK resident persons who have special relationships with non-UK resident persons, or
for conferring on non-UK resident persons the right to a tax credit under section 397(1) of ITTOIA 2005 in respect of qualifying distributions made to them by UK resident companies.
Double taxation arrangements have effect in relation to capital gains tax so far as the arrangements provide—
for relief from capital gains tax,
for taxing capital gains accruing to non-UK resident persons on the disposal of assets in the United Kingdom,
for determining the capital gains to be attributed to non-UK resident persons,
for determining the capital gains to be attributed to agencies, branches or establishments in the United Kingdom of non-UK resident persons, or
for determining the capital gains to be attributed to UK resident persons who have special relationships with non-UK resident persons.
Double taxation arrangements have effect in relation to petroleum revenue tax so far as the arrangements provide for relief from petroleum revenue tax charged under section 12 of the Oil Taxation Act 1983 (charge to petroleum revenue tax on consideration in respect of United Kingdom use of a foreign field asset).
In the case of relief under this Chapter that is not also relief under Chapter 2, the relief is not available in respect of special withholding tax (a corresponding rule applies in relation to relief under Chapter 2 as a result of the definition of foreign tax given by section 21).
Relief under subsection (2)(a), (3)(a) or (4) requires a claim.
In subsection (3) “UK resident person” and “non-UK resident person” have the meaning given by section 989 of ITA 2007.
In subsection (5) “special withholding tax” has the same meaning as in Part 3 (see section 136).
The Commissioners for Her Majesty’s Revenue and Customs may make regulations generally for carrying out the provisions of the treaty sections or any double taxation arrangements.
Regulations under subsection (1) may in particular provide for securing that relief from taxation imposed by the law of the territory to which any double taxation arrangements relate does not enure for the benefit of persons not entitled to that relief.
Subsection (4) applies to tax if—
the tax is deductible from a payment but, in order to comply with double taxation arrangements, has not been deducted, and
it is discovered that the arrangements did not apply to that payment.
Regulations under subsection (1) may in particular provide for authorising recovery of tax to which this subsection applies—
by assessment on the person entitled to the payment from which the tax is not deducted, or
by deduction from subsequent payments.
In subsection (1) “the treaty sections” means— sections 2 to 6, section 134(1), and section 134(3) to (6) so far as relating to section 134(1).
This section does not apply in relation to—
petroleum revenue tax, or
taxes imposed by the law of a territory outside the United Kingdom that—
are of a similar character to petroleum revenue tax, and
are not of a similar character to income tax, corporation tax or capital gains tax.
In this Part “unilateral relief arrangements”, in relation to a territory outside the United Kingdom, means the rules set out in sections 9 to 17.
In sections 11 to 17, and in Chapter 2 (except section 29) in its application to relief under unilateral relief arrangements, references to tax payable or paid under the law of a territory outside the United Kingdom include only—
taxes which are charged on income and which correspond to income tax,
taxes which are charged on income or chargeable gains and which correspond to corporation tax, and
taxes which are charged on capital gains and which correspond to capital gains tax.
For the purposes of subsection (2), tax may correspond to income tax, corporation tax or capital gains tax even though it—
is payable under the law of a province, state or other part of a country, or
is levied by or on behalf of a municipality or other local body.
Credit for tax— is to be allowed against any income tax or corporation tax calculated by reference to that income or gain.
paid under the law of the territory,
calculated by reference to income arising, or any chargeable gain accruing, in the territory, and
corresponding to UK tax,
Credit for tax— is to be allowed against any capital gains tax calculated by reference to that gain.
paid under the law of the territory,
calculated by reference to any capital gain accruing in the territory, and
corresponding to UK tax,
For the purposes of subsection (1), profits from, or remuneration for, personal or professional services performed in the territory are to be treated as income arising in the territory.
For the purposes of subsection (1)(c), tax corresponds to UK tax if—
it is charged on income and corresponds to income tax, or
it is charged on income or chargeable gains and corresponds to corporation tax.
For the purposes of subsection (2)(c), tax corresponds to UK tax if it is charged on capital gains and corresponds to capital gains tax.
For the purposes of subsections (4) and (5), tax may correspond to income tax, corporation tax or capital gains tax even though it—
is payable under the law of a province, state or other part of a country, or
is levied by or on behalf of a municipality or other local body.
If the territory is the Isle of Man or any of the Channel Islands, subsections (1)(b) and (2)(b) have effect with the omission of “in the territory”.
Subsections (1) and (2) are subject to sections 11 and 12.
Subsection (2) applies if—
a person is treated under section 628(5) of ITA 2007 as making accrued income profits in an interest period,
the person would, were the person to become entitled in the relevant tax year to any interest on the securities concerned, be liable in respect of the interest to tax chargeable under ITTOIA 2005 on relevant foreign income, and
the person is liable under the law of the territory to tax in respect of interest payable on the securities at the end of the interest period or the person would be so liable if the person were entitled to that interest.
Credit is to be allowed against income tax calculated by reference to the accrued income profits.
The amount of the credit allowed under subsection (2) is given by— where— AIP is the amount of the accrued income profits, and FTR is the rate of tax to which the person is or would be liable as mentioned in subsection (1)(c).
Subsection (2) is subject to section 11.
In subsection (1)(b) “the relevant tax year” means the tax year in which, under section 617(2) of ITA 2007, the accrued income profits are treated as made.
Expressions used in this section and in Chapter 2 of Part 12 of ITA 2007 (accrued income profits) have the same meaning as in that Chapter.
Credit for tax paid under the law of the territory is not allowed under section 9 or 10 in the case of any income or gains if any credit for that tax is allowable in respect of that income or those gains under double taxation arrangements made in relation to the territory.
If credit in respect of an amount of tax may be allowed under double taxation arrangements made in relation to the territory, credit is not allowed under section 9 or 10 in respect of that tax.
If double taxation arrangements made in relation to the territory contain express provision to the effect that relief by way of credit is not to be given under the arrangements in cases or circumstances specified or described in the arrangements, credit is not allowed under section 9 or 10 in those cases or circumstances.
Credit under section 9 for overseas tax on a dividend paid by a company (“P”) resident in the territory is allowed only if section 13, 14, 15 or 16 so provides.
If credit is allowed in principle as a result of at least one of sections 14, 15 and 16, any tax in respect of P’s profits that is paid by P under the law of the territory is to be taken into account in considering whether any, and (if so) what, credit is in fact to be allowed under section 9 in respect of the dividend.
If credit is allowed in principle as a result of at least one of sections 15 and 16, there is to be taken into account, as if it were tax payable under the law of the territory, any tax that would be so taken into account under section 63(5) if the recipient of the dividend— at least 10% of the voting power in P.
directly or indirectly controlled, or
were a subsidiary of a company that directly or indirectly controlled,
For the purposes of subsection (3), the recipient is a subsidiary of another company if the other company controls, directly or indirectly, at least 50% of the voting power in the recipient.
This section applies for the purposes of section 12(1).
Credit under section 9 for overseas tax on a dividend paid by a company (“P”) resident in the territory is allowed if—
the overseas tax is charged directly on the dividend (whether by charge to tax, deduction of tax at source or otherwise), and
neither P nor the recipient of the dividend would have borne any of that tax if the dividend had not been paid.
This section applies for the purposes of section 12(1).
Credit under section 9 for overseas tax on a dividend paid by a company (“P”) resident in the territory is allowed if conditions A and B are met.
Condition A is that—
the recipient of the dividend is a company resident in the United Kingdom, or
the recipient is a company resident outside the United Kingdom but the dividend forms part of the profits of a permanent establishment of the recipient in the United Kingdom.
Condition B is that the recipient— at least 10% of the voting power in P.
directly or indirectly controls, or
is a subsidiary of a company which directly or indirectly controls,
For the purposes of subsection (4), the recipient is a subsidiary of another company if the other company controls, directly or indirectly, at least 50% of the voting power in the recipient.
This section applies for the purposes of section 12(1).
Credit under section 9 for overseas tax on a dividend paid by a company (“P”) resident in the territory is allowed if each of conditions A to C is met.
Condition A is that—
the recipient of the dividend is a company resident in the United Kingdom, or
the recipient is a company resident outside the United Kingdom but the dividend forms part of the profits of a permanent establishment of the recipient in the United Kingdom.
Condition B is that the recipient— less than 10% of the voting power in P.
directly or indirectly controls, or
is a subsidiary of a company which directly or indirectly controls,
If condition B is met, in subsection (6) “the held percentage” means the voting power in P which is directly or indirectly controlled by—
the recipient, or
a company of which the recipient is a subsidiary.
Condition C is that—
the held percentage has been reduced below 10%,
the recipient shows that the reduction below the 10% limit (and any further reduction)—
could not have been prevented by any reasonable endeavours on the part of the recipient, a parent or an associate, and
was due to a cause or causes not reasonably foreseeable by the recipient, a parent or an associate when control of the relevant voting power was acquired, and
the recipient shows that no reasonable endeavours on the part of the recipient, a parent or an associate could have restored, or (as the case may be) increased, the held percentage to at least 10%.
For the purposes of subsection (6) a company is an “associate” if—
the company is neither the recipient nor a parent,
before the reduction, the voting power in P that is in question was controlled otherwise than directly by the recipient, and
the company is relevant for determining whether, before the reduction, the recipient— at least 10% of the voting power in P.
indirectly controlled, or
was a subsidiary of a company which directly or indirectly controlled,
In subsections (6) and (7) “parent” means a company of which the recipient is a subsidiary.
In subsection (6) “the relevant voting power” means—
the voting power in P as a result of which relief was due under section 14 before the reduction, or
if control of the whole of that voting power was not acquired at the same time, that part of the voting power of which control was last acquired.
For the purposes of this section, the recipient is a subsidiary of another company if the other company controls, directly or indirectly, at least 50% of the voting power in the recipient.
This section applies for the purposes of section 12(1).
Credit under section 9 for overseas tax on a dividend paid by a company (“P”) resident in the territory is allowed if each of conditions A to C is met.
Condition A is that—
the recipient of the dividend is a company resident in the United Kingdom, or
the recipient is a company resident outside the United Kingdom but the dividend forms part of the profits of a permanent establishment of the recipient in the United Kingdom.
Condition B is that the recipient— less than 10% of the voting power in P.
directly or indirectly controls, or
is a subsidiary of a company which directly or indirectly controls,
If condition B is met, in subsection (6) “the held percentage” means the voting power in P which is directly or indirectly controlled by—
the recipient, or
a company of which the recipient is a subsidiary.
Condition C is that—
the held percentage has been acquired in exchange for voting power in another company (“X”),
before the exchange, the recipient— at least 10% of the voting power in X,
directly or indirectly controlled, or
was a subsidiary of a company which directly or indirectly controlled,
the recipient shows that the exchange (and any reduction after the exchange)—
could not have been prevented by any reasonable endeavours on the part of the recipient, a parent or an associate, and
was due to a cause or causes not reasonably foreseeable by the recipient, a parent or an associate when control of the relevant voting power was acquired, and
the recipient shows that no reasonable endeavours on the part of the recipient, a parent or an associate could have restored, or (as the case may be) increased, the held percentage to at least 10%.
For the purposes of subsection (6) a company is an “associate” if—
the company is neither the recipient nor a parent,
before the exchange, the voting power in X that is in question was controlled otherwise than directly by the recipient, and
the company is relevant for determining whether, before the exchange, the recipient— at least 10% of the voting power in X.
indirectly controlled, or
was a subsidiary of a company which directly or indirectly controlled,
In subsections (6) and (7) “parent” means a company of which the recipient is a subsidiary.
In subsection (6) “the relevant voting power” means—
the voting power in X as a result of which relief was due under section 14 before the exchange, or
if control of the whole of that voting power was not acquired at the same time, that part of the voting power of which control was last acquired.
For the purposes of this section, the recipient is a subsidiary of another company if the other company controls, directly or indirectly, at least 50% of the voting power in the recipient.
Subsection (2) applies if—
under the law of the territory, an amount of tax (“the spared tax”) would, but for a relief, have been payable by a company resident in the territory (“company A”) in respect of any of its profits,
company A pays a dividend out of those profits to another company resident in the territory (“company B”),
company B, out of profits which consist of or include the whole or part of that dividend, pays a dividend to a company resident in the United Kingdom (“company C”), and
the circumstances are such that, had company B been resident in the United Kingdom, it would have been entitled, as a result of the operation of section 20(2) in relation to double taxation arrangements made in relation to the territory, to treat the spared tax for the purposes of Chapter 2 as having been payable.
The spared tax is to be taken into account— as if it had been payable and paid.
for the purposes of sections 9 to 16, and
subject to section 31(4), for the purposes of Chapter 2 in its application to relief under these rules in relation to the dividend paid to company C,
References in these rules and that Chapter— are to be read in accordance with subsection (2).
to tax payable or chargeable, or
to tax not chargeable directly or by deduction,
Except as provided by subsection (2), in relation to any dividend paid— credit as a result of these rules is not to be given under section 63(5) in respect of tax which would have been payable under the law of the territory, or under the law of any other territory outside the United Kingdom, but for a relief.
by a company resident in the territory,
to a company resident in the United Kingdom,
Subsection (4) has effect despite any double taxation arrangements— which make provision about a relief given, under the law of the territory in relation to which the arrangements are made, with a view to promoting industrial, commercial, scientific, educational or other development in a territory outside the United Kingdom.
made in relation to the territory, or
made in relation to any other territory outside the United Kingdom,
In this section “these rules” means sections 9 to 16 and this section.
Subsection (2) applies if— credit is to be allowed against any income tax, corporation tax or capital gains tax chargeable in respect of any income or chargeable gain.
under double taxation arrangements, or
under unilateral relief arrangements for a territory outside the United Kingdom,
The amount of those taxes chargeable in respect of the income or gain is to be reduced by the amount of the credit.
In subsection (1) “credit”— but see sections 12(3) and 63(5) (dividends: certain tax payable otherwise than under the law of a territory treated as payable under that law).
in relation to double taxation arrangements, means credit for tax payable under the law of the territory in relation to which the arrangements are made, and
in relation to unilateral relief arrangements for a territory outside the United Kingdom, means credit for tax payable under the law of that territory,
Subsection (2) applies subject to—
the following provisions of this Chapter,
section 106 (Chapter 1 and this Chapter operate for capital gains tax purposes separately from their operation for the purposes of other United Kingdom taxes), and
Chapter 2 of Part 18 of ICTA (double taxation relief: pooling of foreign dividends paid before 1 July 2009).
Credit is allowed under subsection (2) against any tax only if, under the arrangements concerned, credit is allowable against that tax.
Credit against income tax is given effect at Step 6 of the calculation in section 23 of ITA 2007.
Subsections (2) and (3) apply to a claim for relief under section 18(2).
If the claim is for credit for foreign tax in respect of any income or chargeable gain charged to income tax or capital gains tax for a tax year, the claim must be made on or before—
the fourth anniversary of the end of that tax year, or
if later, the 31 January following the tax year in which the foreign tax is paid.
If the claim is for credit for foreign tax in respect of any income or chargeable gain charged to corporation tax for an accounting period, the claim must be made not more than—
four years after the end of that accounting period, or
if later, one year after the end of the accounting period in which the foreign tax is paid.
Subsections (2) and (4) apply if the arrangements are double taxation arrangements.
For the purposes of this Chapter, any amount within subsection (3) is to be treated as having been payable.
An amount is within this subsection if it is an amount of tax that would have been payable under the law of a territory outside the United Kingdom but for a relief—
given under the law of that territory with a view to promoting industrial, commercial, scientific, educational or other development in a territory outside the United Kingdom, and
about which provision is made in double taxation arrangements.
References in this Chapter— are to be read in accordance with subsection (2).
to tax payable or chargeable, or
to tax not chargeable directly or by deduction,
Subsections (2) and (4) have effect subject to—
subsection (6), and
sections 31(4) and 32(5) (income and gains not to be increased in calculations under section 31 or 32 by amounts treated by this section as having been payable).
If section 63(5) applies because conditions A and B in section 63 are met, relief is not given in accordance with section 63(5) (relief for certain tax underlying dividends paid between related companies) because of this section unless double taxation arrangements make express provision for the relief.
Subsection (6) does not affect the operation of section 17(2) (treatment, for purposes of unilateral relief, of dividend paid by foreign company that has received dividends from a company benefiting from tax-sparing relief).
In this Chapter (except section 18)—
“the arrangements” means the arrangements mentioned in section 18(1),
“the non-UK territory” means the territory mentioned in section 18(3),
“foreign tax” means tax chargeable under the law of the non-UK territory—
for which credit may be allowed under the arrangements, and
which is not special withholding tax, and
In subsection (1) “special withholding tax” has the same meaning as in Part 3 (see section 136).
The definitions in subsection (1) are to be read with sections 17(3) and 20(4) (meaning of references to tax payable or chargeable, and of references to tax not chargeable directly or by deduction).
See also section 8(2) (meaning of references to tax payable or paid under the law of a territory outside the United Kingdom).