A UK company is owned by 3 shareholders (2 individuals and one listed company) in the approximate ratio 30%, 35%, 35%.
The shareholders set up a new company overseas in the same ownership ratios.
Are the two companies connected under Sch28AA and if so, why? Intuitively I feel that they are but para 4 seems to say that they aren't because the 40 per cent test isn't satisfied.
Thanks
Replies (2)
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Transfer Pricing
The link below should prove useful - think what you are looking for is at annex VI (page 50)
http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/sme_user_guide.pdf
Scott
Transfer pricing - participation in the management, capital or c
Hi Melanie
Para 4 of Schedule 28AA is the right section for you, but remember it's not just a shareholding test, you have to consider management and control. Schedule 28AA refers to the s840 ICTA 88 definition of control.
Commercially a genuine 3-way split of control of a company is very rare. You tend to find that one or two of the partners is dominant and effectively manages the company. If they have powers to control the company through any document you are caught by s840.
You also need to consider the rules in the territory of the other company. Most countries now have transfer pricing rules and many have lower thresholds than the UK. Unless it's a tax haven, of course, in which case you're at high risk of UK enquiry and challenge.
I hope that helps
Jenny
Jennifer Paul
Director
Transfer Pricing Consultants Ltd
www.TransferPricingConsultants.co.uk