INTM432160 - TIOPA10 Part 4: how it works - Relief to prevent a double charge under TIOPA10 Part 4
Adjustments to prevent double taxation may be made under:
- TIOPA10/S174 onwards in respect of a transaction between two UK taxpayers, or
- The terms of a double taxation treaty ('DTA') in respect of a transaction with a person resident in the country of the treaty partner.
Transactions between UK taxpayers
Under the rule in TIOPA10/S174, where:
- one of the affected persons is `advantaged` and subject to an adjustment under the basic rule,
- and the other affected person is within the charge to income tax or corporation tax in respect of profits arising from the relevant activity, and is `disadvantaged`
- the latter will be entitled to claim what amounts to a compensating adjustment in computing its UK chargeable profits or losses
Further guidance on claiming compensating adjustments in computing profits is at INTM470030.
To claim a similar adjustment in computing profits arising before 1 April 2004, the disadvantaged person would also need to have been UK resident at the relevant time.
If an adjustment is made to the taxable profits of a UK taxpayer and it appears that there is a person who is or may be a disadvantaged person in relation to that transaction or series of transactions, TIOPA10/S185 requires that a notice be issued to the potentially-disadvantaged person under that section. The disadvantaged person has two years following the adjustment to the advantaged person's tax return in which to make their claim.
UK non-resident transactions
Where there is a claim to compensating relief, there are rules in TIOPA10/S188 and S189 to prevent a taxpayer obtaining the benefit of excess relief from double taxation. The relief available will not exceed that which would have been available had the arm's length provision been in place. This is most likely to apply in relation to transactions between a UK company (the advantaged person) and the overseas permanent establishment of another UK company (the disadvantaged person).
