SCHEDULES

SCHEDULE 4Avoidance involving profit fragmentation arrangements

1Introduction and overview

1

This Schedule contains provision about countering the tax effects of certain arrangements (“profit fragmentation arrangements”).

2

Profit fragmentation arrangements involve the following parties—

a

a person resident in the United Kingdom (“the resident party”),

b

an overseas person or entity (“the overseas party”) who is not resident in the United Kingdom, and

c

an individual (a “related individual”) who is—

i

the resident party,

ii

a member of a partnership of which the resident party is a partner, or

iii

a participator in a company which is the resident party.

3

An “overseas person or entity” means—

a

a person abroad within the meaning given by section 718 of ITA 2007, or

b

a company, partnership, trust or other entity or arrangements established or having effect under the law of a country or territory outside the United Kingdom (regardless of whether it has legal personality as a body corporate).

4

Paragraphs 2 to 6 deal with the definition of profit fragmentation arrangements.

5

Paragraph 7 deals with the adjustments which must be made to counteract the effects of such arrangements.

6

Other provisions of this Schedule—

a

deal with double taxation and the tax treatment of reimbursement payments (paragraphs 8 and 9), and

b

deal with interpretation and commencement (paragraphs 10 to 12).