Finance Act 2024

Profit element of non-arm's-length payments to connected parties not to qualify for relief

6 (1) Section 1218ZCG (expenditure that qualifies for museums and galleries exhibition tax relief) is amended as follows.

(2) In subsection (1), after paragraph (b) (but before the following “and”) insert—

“(ba) is not excluded by subsection (2A),”.

(3) After subsection (2) insert—

“(2A) Expenditure is excluded to the extent that it represents connected party profit, unless subsection (2C) applies.

(2B) For the purposes of subsection (2A), expenditure represents connected party profit—

(a) if it is a payment to a person (“C”) in exchange for something supplied, transferred or done by that person,

(b) if the company is connected with C, and

(c) if, and to the extent that, the amount of the payment exceeds the expenditure incurred by C in supplying, transferring or doing that thing.

(2C) This subsection applies if the amount of the payment is no more than would have been the case had the transaction been entered into at arm’s length.

(2D) A transaction would have been entered into “at arm’s length” if it made “the arm’s length provision” within the meaning of Part 4 of TIOPA 2010 (and for this purpose any limitation on the application of that Part is to be disregarded).

(2E) Subsections (2F) and (2G) apply if—

(a) the supply by C to the company is one of a sequence of transactions in which the thing supplied has been supplied by one person to another, and

(b) either—

(i) each transacting party in the sequence is connected to at least one other transacting party in the sequence, or

(ii) each transaction in the sequence is entered into in furtherance of a single scheme or arrangement (of whatever kind, and whether or not legally enforceable).

(2F) The reference to C in subsection (2B)(c) is to be read as a reference to the supplier in the first transaction in the sequence.

(2G) The reference to the transaction in subsection (2C) is to be read as including each transaction in the sequence.

(2H) In this section, “payment” includes any transfer of value.”

(4) Those amendments have effect in relation to expenditure incurred on or after 1 April 2024.