INTM436080 - Transfer pricing before CTSA
Information powers
Unlike Schedule 28AA, its predecessor ICTA88/S770 has its own information powers contained in ICTA88/S772. ICTA88/S772 provides wide-ranging powers to obtain information in connection with ICTA88/S770.
ICTA88/S772 applies largely to bodies corporate (a Company's Act expression meaning a company limited by shares or by guarantee, or an unlimited company). This is a narrower category than that of 'body of persons', to which ICTA88/S770 applies. The exception is ICTA88/S772(6), which casts a wider net.
The information powers may be exercised only by the Board. If delays are experienced, it is good practice to first draw a company's attention to the provisions of ICTA88/S772, in order to give a reasonable time extension to allow the company to provide information informally. Where a formal order is subsequently required because of non-compliance, the file must be sent to Business International. As with directions, discretion over the use of ICTA88/S772 lies with the Board, and no commitment should be given in advance that a formal order will in fact be given. Practical experience suggests that it is unlikely that formal steps will need to be taken.
ICTA88/S772(1) and (2)
enable information to be obtained about:
- transactions to which ICTA88/S770 might apply,
- other relevant transactions which the same company has entered into with group members or third parties,
- relevant transactions which associates have entered into either with group members or with third parties.
These are transactions which appear to the Board:
- to be, or to be connected with, a transaction with respect to which the Board might give a direction under ICTA88/S770; or
- to be relevant for determining whether such a direction could or should be given in any case; or
- to be relevant for determining for the purposes of that section what price any property sold would have fetched had the sale been one between independent persons dealing at arm's length
Where a direction has already been given under ICTA88/S770(2)(d), the information powers in ICTA88/S772(1)(a) and (b) cannot be invoked in respect of the transactions covered in the direction, since they have ceased to be relevant. There is no similar restriction on the use of ICTA88/S772(1)(c).
ICTA88/S772(3)
enables information to be obtained from a UK resident parent company, including books, accounts, documents and other records of any non-resident 51% subsidiary which relate to transactions to which ICTA88/S770 might apply or to transactions in the same or similar assets. The provisions apply to all UK parent companies, even if the UK company is itself owned (immediately or ultimately) by an overseas company; but where the ownership is overseas, information can only be obtained in respect of the UK company's own subsidiaries and not, for example, in respect of fellow subsidiaries in the overseas group which are resident outside the UK.
Where a direction has already been given under ICTA88/S770(2)(d), ICTA88/S772(3) cannot be invoked in respect of the transactions covered in the direction.
ICTA88/S773(4) and (5)
allow the parent body to present to the Board circumstances which it considers excuse it from complying with a notice under ICTA88/S773(3). If this approach is refused, the parent body can appeal against the decision to the Special Commissioners.
ICTA88/S772(6)
enables the Board to authorise an Officer to enter premises and inspect books, accounts, documents or records where it is considered necessary in assisting the Board to determine whether a direction should be made. This is a controversial power requiring sensitive handling. Where it is thought that its employment could usefully assist enquiries, advice should be sought from Business International at an early stage.
Information which is outside the scope of ICTA88/S772 (for example, the accounts of overseas members of foreign-owned groups), may be obtained in suitable cases using the Exchange of Information Article in the relevant double taxation agreement. Remedies under domestic law should be exhausted first. For details on the circumstances and form for making requests for information from overseas tax authorities under the Exchange of Information provisions, see INTM156000 and INTM462080.
The powers at TMA70/S20 are also available for use in transfer pricing cases.
