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Chapter INTM413180

Document Cited in Related
Vincent
Published date09 April 2016
Record NumberINTM413180
Position for accounting periods starting on or after 4 March 2005

TIOPA10/S161 and TIOPA10/S162 (previously ICTA88/SCH28AA/PARA4A) apply the transfer pricing rules where persons have “acted together” in relation to the financing arrangements of a company or partnership. It is included as a type of “indirect participation” in TIOPA10, though in practice it continues to be described as acting together, and it relates to circumstances where there is a community of interests without the participation conditions of TIOPA10/S148 having been satisfied.

“Acting together” has a very wide meaning and it is not necessary for a loan provider to have an equity interest in the borrower for it to be within the scope of the legislation. However, where the loan is from a lender who is otherwise unconnected with the equity investors, in normal circumstances the risk that the terms are other than arm’s length is likely to be low.

INTM519040 explains in more detail how to apply the acting together rules to buyouts and private equity financing.

Transitional rules for pre-4 March 2005 financing arrangements (grandfathering)

Where the financing arrangements in question were made before 4 March 2005, the relevant date for the application of PARA4A (as it then was) will depend on whether there has been a variation in the terms of the debtor relationship. Where the financing arrangements in question were made before 4 March 2005 and remained unchanged until 1 April 2007, the new rules do not apply until 1 April 2007.

Where the financing arrangements in question were made before 4 March 2005 and the arrangements were varied before 1 April 2007 then the new rules...

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