Taxation (International and Other Provisions) Act 2010

[F1 Exemption and related provision U.K.

Textual Amendments

F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1, 10(1)(2)(a)(3) (with Sch. 5 paras. 27, 32-34)

438 Exemption for interest payable to third parties etc U.K.

(1) Amounts that arise to a qualifying infrastructure company in a relevant accounting period are not to be regarded for the purposes of this Part as tax-interest expense amounts of the company so far as they qualify as exempt amounts in that period (see subsections (2) and (3)).

(2) An amount qualifies as an exempt amount so far as it is attributable, on a just and reasonable apportionment, to the times in the relevant accounting period when—

(a) each creditor in relation to the amount is within subsection (3) or the amount is in respect of a qualifying old loan relationship (see section 439), and

(b) the recourse of each creditor in relation to the amount is limited to relevant infrastructure matters (see subsections (4) to (6)).

(3) A creditor is within this subsection if—

(a) the creditor is not a related party of the company, or

(b) the creditor is a company which is a qualifying infrastructure company,

but section 466(2) does not apply for the purposes of paragraph (a).

(4) The recourse of a creditor is limited to relevant infrastructure matters if, in the event that the company fails to perform its obligations in question, the recourse of the creditor is limited to—

(a) income of a qualifying infrastructure company,

(b) assets of a qualifying infrastructure company, or

(c) shares in or debt issued by a qualifying infrastructure company,

whether the income, assets, shares or debt relate to the company concerned or another qualifying infrastructure company.

(5) For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is ignored if—

(a) it is provided before 1 April 2017, or

(b) it is provided at any later time by a person who, at that time, is not a related party of the company or is a relevant public body.

[F2 (5A) For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is also ignored if—

(a) it is provided before 29 October 2018,

(b) the company concerned has not been UK resident at any time before that date, and

(c) the amount concerned is in respect of a loan relationship, derivative contract or relevant arrangement or transaction (within the meaning of section 382(4)) to which the member in question is a party for the purposes of its UK property business.]

(6) For the purposes of subsection (4) a non-financial guarantee in favour of the creditor is ignored if—

(a) it guarantees the performance by any person of contractual obligations to provide goods or services to a qualifying infrastructure company,

(b) it is given by the person providing the goods or services or by a person who is a related party of that person, and

(c) the maximum amount for which the guarantor is liable does not exceed the consideration given under the contract for the provision of the goods or services.

(7) In this section “creditor” means—

(a) if the amount meets condition A in section 382, the person who is party to the loan relationship as creditor,

(b) if the amount meets condition B in that section, the person other than the company who is party to the derivative contract, and

(c) if the amount meets condition C in that section, the person other than the company who is party to the relevant arrangement or transaction.

Textual Amendments

F2 S. 438(5A) inserted (6.4.2020) by Finance Act 2019 (c. 1), Sch. 5 paras. 34, 35 (with Sch. 5 para. 36)

[F3 438A Application of section 438: certain creditors treated as qualifying infrastructure companies U.K.

(1) This section applies where—

(a) a company (“C”), at a time in the period mentioned in subsection (1) of section 438—

(i) is a member of the worldwide group of which the qualifying infrastructure company mentioned in that subsection is a member, but

(ii) is not a UK group company; and

(b) C is a creditor in relation to an amount which—

(i) is a relevant loan relationship debit (as defined in section 383) for the debtor company, or

(ii) would be a relevant loan relationship debit if the debtor company were UK resident.

(2) For the purposes of section 438, C is treated in relation to the amount mentioned in subsection (1)(b) (the “relevant loan amount”) as a qualifying infrastructure company if—

(a) throughout the period mentioned in section 438(1), C—

(i) meets the public infrastructure income test for the accounting period (see subsections (2) to (4) of section 433) and subsection (3) of this section), and

(ii) meets the public infrastructure assets test for the accounting period (see subsections (5) to (10) of that section and subsection (4) of this section),

(but does not satisfy the conditions in subsection (1)(c) and (d) of section 433);

(b) the loan to which the relevant loan amount relates (the “relevant loan”) is fully funded by another loan (the “corresponding loan”) made to C for that purpose and on substantially the same terms as the relevant loan; and

(c) amounts arising to C in respect of the corresponding loan would, if section 438(2) applied to C, qualify as “exempt amounts” within the meaning of that subsection.

(3) For the purposes of subsection (2)(a)(i), C is also treated as meeting the public infrastructure income test for an accounting period if all, or all but an insignificant proportion, of its income for the period derives from—

(a) anything listed in any of paragraphs (a) to (c) of section 433(2),

(b) shares in, or debt issued by, a company that meets the test in section 433(2) for that period,

(c) shares in or debt issued by a company that is treated as meeting the public infrastructure income test for that period by reason of this subsection.

(4) For the purposes of subsection (2)(a)(ii), C is also treated as meeting the public infrastructure assets test for an accounting period if all, or all but an insignificant proportion, of the total value of the company's assets recognised in an appropriate balance sheet on each day in that period derives from—

(a) anything listed in any of paragraphs (a) to (e) of section 433(5),

(b) shares in, or debt issued by, a company that meets the test in section 433(5) for that period,

(c) shares in or debt issued by a company that is treated as meeting the public infrastructure assets test for that period by reason of this subsection.

(5) For the purposes of determining whether amounts arising to C would qualify as exempt amounts under section 438(2) (for the purposes of subsection (2)(c) of this section), the recourse of a creditor is treated as being limited to relevant infrastructure matters if, in the event that C fails to perform its obligations in question, the recourse of the creditor is limited to—

(a) anything listed in paragraphs (a) to (c) of section 438(4),

(b) shares in or debt issued by a company whose income and assets consist wholly of income and assets within those paragraphs,

(c) shares in or debt issued by a company whose income and assets consist wholly of income and assets within paragraphs (a) or (b) of this subsection, or

(d) shares in or debt issued by a company whose income and assets consists wholly of income and assets within paragraphs (a) to (c) of this subsection, and so on.

(6) For the purposes of subsection (5), in determining whether a company’s income and assets consists wholly of income and assets of a particular description, any source of income or any asset is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising from the source, or (as the case may be) the value of the asset recognised, in the accounting period.]

Textual Amendments

F3 S. 438A inserted (with effect in accordance with Sch. 3 para. 30-36 of the amending Act) by Finance (No. 2) Act 2023 (c. 30), Sch. 3 para. 16

439 Exemption in respect of certain pre-13 May 2016 loan relationships U.K.

(1) A loan relationship is a “qualifying old loan relationship” of a qualifying infrastructure company if—

(a) the company entered into the loan relationship on or before 12 May 2016, and

(b) as at that date, at least 80% of the total value of the company's future qualifying infrastructure receipts for the qualifying period was highly predictable by reference to qualifying public contracts,

but see subsection (8) for cases where a loan relationship is not a qualifying old loan relationship of the company.

(2) For the purposes of this section “the qualifying period” means—

(a) in a case where the loan relationship would cease to subsist at any time before 12 May 2026 (if any amendments of the loan relationship made on or after 12 May 2016 are ignored), the period beginning with 12 May 2016 and ending with that time, and

(b) in any other case, the period of 10 years beginning with 12 May 2016.

(3) For the purposes of this section “qualifying infrastructure receipts”, in relation to a company (“C”), means—

(a) receipts arising from qualifying infrastructure activities carried on by C, and

(b) such proportion of the receipts arising from qualifying infrastructure activities carried on by another company as, on a just and reasonable basis, is attributable to C's interests in the other company (whether direct or indirect) arising as a result of shares or loans [F4 ,

but ignoring amounts that represent the reimbursement of expenses incurred by C or the other company.]

(4) For the purposes of this section receipts are highly predictable by reference to qualifying public contracts so far as their value can be predicted with a high degree of certainty because—

(a) the amounts of the receipts are fixed by a qualifying public contract, and

(b) the factors affecting the volume of receipts are fixed by a qualifying public contract or are otherwise capable of being predicted with a high degree of certainty.

(5) For this purpose any provision of a qualifying public contract (however expressed) that adjusts the amount of a receipt for changes in the general level of prices or earnings is to be ignored.

(6) For the purposes of this section a contract is a “qualifying public contract” if—

(a) it was entered into at any time on or before 12 May 2016 and, as at that time, it was expected to have effect for at least 10 years, and

(b) it was entered into either with a relevant public body or following bids made in an auction conducted by a relevant public body.

(7) If a qualifying old loan relationship is amended after 12 May 2016 so as to increase the amount lent or extend the period for which the relationship is to subsist—

(a) section 438 is to have effect as if none of those amendments were made (and, accordingly, the exemption under that section has no effect in relation to the increase in the amount or the period of the extension), and

(b) such apportionments of amounts in respect of the relationship are to be made as are just and reasonable.

(8) A loan relationship to which a qualifying infrastructure company is a party at any time is not a qualifying old loan relationship of the company at that or any subsequent time if, on the relevant assumptions, the condition in subsection (1)(b) would not have been met.

(9) The relevant assumptions are that—

(a) the assets held by the company at that time were the only assets that the company held on 12 May 2016,

(b) the assets held at that time by any other company in which it has interests (whether direct or indirect) arising as a result of shares or loans were the only assets that the other company held on 12 May 2016, and

(c) a qualifying infrastructure receipt could not be regarded as highly predictable if, on 12 May 2016, the public infrastructure asset in question did not exist or was not in the course of being constructed or converted.

(10) For the purposes of this section the value of a receipt on 12 May 2016 is taken to be its present value on that date, discounted using a rate that can reasonably be regarded as one that, in accordance with normal commercial criteria, is appropriate for the purpose.

(11) In this section “receipts” means receipts of a revenue nature.

Textual Amendments

F4 Words in s. 439(3) inserted (retrospectively) by Finance Act 2019 (c. 1), Sch. 11 paras. 13, 24

440 Loans etc made by qualifying infrastructure companies to be ignored U.K.

(1) This section applies where—

(a) a company is a qualifying infrastructure company throughout an accounting period, and

(b) the company would (but for this section) have had tax-interest income amounts in the accounting period.

(2) For the purposes of this Part, the company is treated as if it did not have any tax-interest income amounts in the accounting period.

441 Tax-EBITDA of qualifying infrastructure company to be nil U.K.

(1) This section applies where a company is a qualifying infrastructure company throughout an accounting period.

(2) For the purposes of this Part, the tax-EBITDA of the company for the accounting period is nil.

442 Amounts of qualifying infrastructure company left out of account for other purposes U.K.

(1) This section applies where a company is a qualifying infrastructure company throughout a relevant accounting period.

(2) In calculating—

(a) the adjusted net group-interest expense of the worldwide group for the period of account concerned, or

(b) the qualifying net group-interest expense of the worldwide group for the period of account concerned,

amounts that are exempt amounts of the company under section 438, or are treated as mentioned in section 440, are to be left out of account.

(3) For the purposes of this Part the group EBITDA of the worldwide group for the period of account concerned is to be calculated as if the group did not include the company in respect of the relevant accounting period.

443 Interest capacity for group with qualifying infrastructure company etc U.K.

(1) If a worldwide group for a period of account includes a qualifying infrastructure company at any time, the general rule is that the interest capacity of the group for the period is calculated as if section 392 did not contain the de minimis provisions.

[F5 (2) There is an exception to the general rule (see subsections (4) and (5)) which—

(a) applies if no tax-interest income amounts of any qualifying infrastructure company (“Q”) which is a member of the group for the period are receivable from another qualifying infrastructure company which is not a member of the group for the period but is a related party of Q at any time in that period, and

(b) depends on the comparison set out in subsection (3),

and, for the purposes of paragraph (a), tax-interest income amounts are to be ignored if, having regard to all the circumstances, it is reasonable to regard the amounts as insignificant.]

(3) The following amounts must be compared with each other—

(a) the total disallowed amount of the group in the period calculated as if this Chapter (including subsection (1) of this section but ignoring the remainder of it) were contained in this Part (“the Chapter 8 amount”), and

(b) the total disallowed amount of the group in the period calculated as if this Chapter were not contained in this Part and as if section 392 contained only the de minimis provisions (“the ordinary amount”).

(4) If the Chapter 8 amount exceeds the ordinary amount, the interest capacity of the worldwide group for the period is taken to be the de minimis amount (as defined by 392(3)).

(5) If the interest capacity of the worldwide group for the period is given by subsection (4), nothing else in this Chapter has effect in relation to the worldwide group for the period.

(6) For the purposes of this section the reference to section 392 not containing the de minimis provisions is a reference to that section not containing subsections (2) and (3) of that section.

(7) For the purposes of this section the reference to section 392 containing only the de minimis provisions is a reference to that section having effect as if for subsections (1) and (2) of that section there were substituted—

“(1) For the purposes of this Part the “interest capacity” of a worldwide group for a period of account of the group is the de minimis amount.”]

Textual Amendments

F5 S. 443(2) substituted (with effect in accordance with Sch. 8 para. 22 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 10