Taxation (International and Other Provisions) Act 2010 section 148

The "participation condition"

Section 148 explains when the "participation condition" is met for the purposes of the transfer pricing rules, which requires a sufficient relationship between the two parties to a transaction before those rules can apply.

• The participation condition must be satisfied before the transfer pricing rules in section 147 can apply to adjust a transaction between two parties to an arm's length basis.
• For financing arrangements (loans, guarantees and other forms of finance), the required relationship between the parties can exist either at the time the arrangement was made or at any point within six months afterwards (Condition A).
• For all other types of transaction, the required relationship must exist at the time the arrangement was made or imposed (Condition B), with no six-month extension.
• The required relationship is met where one party directly or indirectly participates in the management, control or capital of the other, or where a third party participates in both.