Income Tax (Trading and Other Income) Act 2005 section 608V

Meaning of direct or indirect participation in management, control or capital

Section 608V defines what it means for one person to participate directly or indirectly in the management, control or capital of another person, for the purposes of determining whether persons are related under the offshore receipts in respect of intangible property rules.

• This section supports the definition of "related persons" used in the offshore intangible property income rules by clarifying what counts as participation in another person's management, control or capital.
• Direct participation is determined by applying the same test used in the transfer pricing legislation — broadly, whether a person holds a sufficient share of the management, control or capital of another person.
• Indirect participation is also determined by reference to the transfer pricing rules — covering situations where a person participates through intermediaries or is one of several major participants acting together.
• Both direct and indirect participation can establish a relationship between persons, which may bring offshore intangible property income within the scope of UK tax.