OT22090 - Interest and Financing

Pre-ordained Circular and Other Transactions

Inspectors may infrequently meet intra group transactions which appear to be part of a wider scheme or arrangement or series of arrangements directed to breaching the corporation tax oil ring fence. As our task is to maintain the ring fence such cases must be worked in consultation with the Assistant Director, and may have to be referred for legal advice.

Some of the characteristics of any such scheme may be that it contains one or more features which would be unacceptable to arm's length good banking practice (see previous pages).

Establishing the full factual background may require some perseverance. Where there are good reasons for doing so, and the perceptions must be explained to customers, probably at a meeting, Inspectors should be prepared to ask for copy minutes of Board meetings, copies of minutes of any relevant internal meetings which are not Board meetings, copies of slides and documents used in any internal presentation, copies of internal memoranda and so on. Where such requests appear appropriate the position should first be discussed with the Assistant Director.

First impressions can be misleading, and customers are entitled to expect explanations to be fully and carefully considered. But if the facts, as eventually established, disclose what Oil Taxation Office would regard as an aggressive avoidance scheme, a comprehensive litigation report may have to be drafted for approval by the Assistant Director and submission to the Solicitors Office. The latter will advise on the range of arguments which may have to be considered.

If it appears that liaison with the fiscal authorities in another country is desirable, the Assistant Director must again be consulted before any action is taken.