What is the purpose of section 764 of the Income Tax (Trading and Other Income) Act 2005?

Section 764 ensures that the special relationships rule in section 763 is interpreted consistently with equivalent rules found in United Kingdom double taxation treaties. It directs that the interpretive guidance in sections 131 to 133 of TIOPA 2010 applies, preventing inconsistent outcomes between domestic law and treaty provisions regarding inflated interest or royalty payments between connected parties.

How does section 764 relate to double taxation agreements in the United Kingdom?

Section 764 aligns the domestic special relationships rule with the equivalent provisions in United Kingdom double taxation agreements. By referencing sections 131 to 133 of TIOPA 2010, it ensures the same principles used to interpret treaty-based special relationship rules also apply under domestic law, creating a single consistent interpretive framework for arm's length determinations.

What are sections 131 to 133 of TIOPA 2010 and why are they relevant to section 764?

Sections 131 to 133 of the Taxation (International and Other Provisions) Act 2010 provide interpretive guidance on special relationship provisions found in double taxation treaties. Section 764 requires this same guidance to be applied when interpreting the domestic special relationships rule in section 763, ensuring consistency between domestic legislation and international treaty obligations.

How does section 764 affect interest or royalty payments between related parties?

When interest or royalties are paid between connected parties at rates exceeding arm's length amounts, section 763 allows the excess to be taxed differently. Section 764 ensures that the method for determining the arm's length amount and treating the excess follows the same approach used under double taxation treaty provisions, guided by TIOPA 2010 sections 131 to 133.

Income Tax (Trading and Other Income) Act 2005 section 764

Application of ICTA provisions about special relationships

Section 764 ensures that the special relationships rule in section 763 is interpreted consistently with equivalent rules found in double taxation treaties.

The special relationships rule in section 763 must be construed in line with similar provisions in double taxation agreements
The relevant interpretive guidance is found in sections 131 to 133 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010)
This alignment ensures that interest or royalty payments affected by special relationships are treated consistently whether under domestic law or treaty provisions
The effect is to prevent inconsistent outcomes where similar anti-avoidance rules exist in both domestic legislation and international tax treaties

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member