Taxation (International and Other Provisions) Act 2010 section 133

Special relationship rule for royalties: matters to be shown by taxpayer

Section 133 sets out what the taxpayer must demonstrate when the special relationship rule for royalties applies, placing the burden of proof on the taxpayer to show either that no special relationship exists or what the royalties would have been without it.

• When the special relationship rule applies, the taxpayer must show either that no special relationship exists, or what rate or amounts of royalties would have been payable without the special relationship.
• To demonstrate the absence of a special relationship, the taxpayer must show that no connected person (as described in section 132) has previously been the beneficial owner of the asset in respect of which the royalties are paid, nor of any asset from which that asset is derived or which it represents.
• Alternatively, the taxpayer must show that the relevant transaction or series of transactions would have taken place anyway without a special relationship, and what amounts would have been paid under those transactions in the absence of such a relationship.
• This section supplements section 132 and was originally based on section 808B(5) to (7) of the Income and Corporation Taxes Act 1988.

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