LLM2170 - Syndicate accounts: taxation: transfer pricing
For accounting periods beginning after 31 March 2004, Finance Act 2004 applies the 바카라 사이트˜transfer pricing바카라 사이트™ provisions of ICTA88/SCH28AA to UK-UK transactions. International Manual (INTM431000) has guidance on the application of Schedule 28AA (see LLM10000). Details are available in a memorandum agreed between HMRC and Lloyd바카라 사이트™s, and published by Lloyd바카라 사이트™s as an annex to the Lloyd바카라 사이트™s Market Bulletin Y3672 of 14 November 2005. Click to see the memorandum.
The rules apply where a person participates directly or indirectly in the management, control or capital of another person (or where both 바카라 사이트˜affected persons바카라 사이트™ are under the same control), in cases where a potential tax advantage is conferred on 바카라 사이트˜affected persons바카라 사이트™ from transactions that are not made at arm바카라 사이트™s length. The바카라 사이트˜advantaged person바카라 사이트™ may be required to adjust their price for the transaction to an arm바카라 사이트™s length provision, and a 바카라 사이트˜compensating adjustment바카라 사이트™ may be required for the 바카라 사이트˜disadvantaged person바카라 사이트™.
The legislation will only apply in a limited range of circumstances in the Lloyd바카라 사이트™s market. A syndicate is not a person and is not itself subject to the rules. Members do not usually participate in the management of a managing agent, and unaligned members (LLM1060) generally are unlikely to be connected to a managing agent. Smaller corporate members are likely to be excluded by virtue of the exemption in the legislation for small and medium-sized enterprises. In the Lloyd바카라 사이트™s context the rules are therefore most likely to apply to transactions of a syndicate managed by a managing agent that is connected with a large corporate member as part of an integrated Lloyd바카라 사이트™s vehicle.
The sums potentially affected are likely to be fees and profit commission charged, and expenses (including expenses from connected service companies, coverholders and brokers) recharged by managing agents to members of the syndicate.
The standard Lloyd바카라 사이트™s agency agreement between managing agents and members requires equity of treatment between aligned and unaligned members, and that expenses must be necessary and reasonable. These rules may be modified in the case of aligned syndicates, but Lloyd바카라 사이트™s still exercise some scrutiny over the charges levied. Lloyd바카라 사이트™s rules also prohibit connection between managing agents and brokers, although it is possible for them to be connected for tax purposes.
There are likely to be relatively few cases in which the legislation will be invoked. Where it does apply, the adjustments made at member level and in the managing agent or other connected company may have effect for tax purposes in different periods, because of the effect of the declaration basis (LLM4060).
The RITC paid by one syndicate to another is required by Lloyd바카라 사이트™s rules to be fair and equitable to both sets of members and is likely therefore to meet the arm바카라 사이트™s length rule. The provision made by a single-member corporate syndicate is not a transaction for the purposes of the legislation.