Forex and transfer pricing (TIOPA10/Part 4)

Where, after 1 April 2004, a UK company is thinly capitalised, TIOPA10/Part 4 will apply to restrict the interest deduction. In summary, Part 4 applies where:

provision has been made between two persons (provision includes the making of a loan, although it goes far wider than this), and

one of the affected persons participates directly or indirectly in the management, control or capital of the other, or some third party participates directly or indirectly in the management, control or capital of each;

the provision is on non-arm's length terms, and

it confers a potential UK tax advantage on one or both persons.

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