Taxation (International and Other Provisions) Act 2010 section 199

Pre-conditions for making election under section 200

Section 199 sets out the five conditions (A to E) that must all be met before a company can make an election under section 200 to pay additional tax instead of making balancing payments in a transfer pricing context.

• Both parties involved in the transaction must be companies, and only one of them (the "advantaged person") must have gained a UK tax advantage from the actual pricing arrangement, while the other (the "disadvantaged person") must be within the charge to UK income tax or corporation tax on profits from the relevant activities.
• The transaction in question must relate to a security — a term used broadly here to include securities that do not create or evidence a charge on assets.
• Even where money has been advanced without a formal security being issued, any interest or other consideration paid by the borrowing company for the use of that money is treated as if it were paid in respect of a security issued by that company, thereby bringing such informal lending arrangements within scope.
• The capital market condition, as defined in section 204, must also be satisfied before the election can be made.