Taxation (International and Other Provisions) Act 2010 section 218

Meaning of "advance pricing agreement"

Section 218 defines what an advance pricing agreement (APA) is and sets out the range of matters that such an agreement can cover.

• An APA is a formal written agreement made between HMRC and a taxpayer, following an application by the taxpayer, which expressly declares itself to be an agreement for the purposes of this section.
• An APA can cover how income is attributed to a UK branch, agency, or permanent establishment — with different rules depending on whether the taxpayer is a company or an individual.
• An APA can also address the territorial location of income (i.e. whether income is treated as arising outside the UK) and the tax treatment of transactions between the taxpayer and any associate (transfer pricing matters), whether those transactions occur before or after the agreement date.
• For taxpayers carrying on oil-related ring-fence trades, an APA can additionally cover the transfer pricing treatment of transactions between the ring-fenced trade and any other activities the taxpayer carries on.