Corporation Tax Act 2009 section 931P

Schemes involving payments not on arm's length terms

Section 931P is an anti-avoidance rule that removes the tax exemption from distributions where goods or services have been priced off-market as part of a tax advantage scheme.

• A dividend or distribution that would normally be exempt loses its exemption if it forms part of a tax advantage scheme involving non-arm's length payments for goods or services
• The rule is triggered when a relevant person makes or receives a payment, or gives up income, in respect of goods or services at an amount that differs from what would have applied had the distribution not been made
• The purpose is to prevent companies from deflating taxable trading profits through mispriced transactions in return for a compensating tax-exempt distribution
• The rule does not apply where the transactions in question already fall within the transfer pricing provisions in Part 4 of the Taxation (International and Other Provisions) Act 2010