INTM432120 - Schedule 28AA: how it works

Special Cases

Charities

In principle, the funding by UK charities of their UK trading affiliates falls to be considered under Schedule 28AA. When reviewing the funding of charities and their associates it should be recognised that they are expected to follow the general advice and guidelines of the Charity Commission in considering the nature of their investments in trading affiliates. This is consistent with paragraph 1.55 of the OECD Transfer Pricing Guidelines. Where, exceptionally, charities enter into financial arrangements which are other than in accordance with the Commission's advice or guidelines, or where avoidance is present, the provisions of Schedule 28AA could be in point. This is an area on which advice should be sought from CT & VAT, International CT.

Life assurance companies

Specific guidance concerning the application of certain aspects of Schedule 28AA to life insurance companies and to connected companies with which they carry out transactions is given in the Life Assurance Manual paragraph 3.51 onwards.

Petroleum companies

The Large Business Service (“LBS”)is responsible for applying the transfer pricing rules to transactions between companies operating in the North Sea and their associates, who may be resident in the UK. Schedule 28AA applies to these transactions, except for the disposals of oil and gas to which the rules in ICTA88/S493 apply. In both types of case, the application of the rules can have an impact on the computation of profits of associates of North Sea companies. If the application of these rules is considered to be relevant to any District enquiry, officers should consult the LBS.

The transfer pricing rules also apply to sales of oil and gas produced overseas by a company in which the buyer and linked companies have an interest of 20 per cent or more. These rules are unlikely to be relevant for cases dealt with outside the LBS. If the application of these rules is considered to be relevant to any District enquiry, officers should consult the LBS.