INTM414250 - The participation condition: The acting together rules

What has been amended, removed, or added in broad terms

TIOPA10/S161 has been amended and TIOPA10/S162 has been repealed to provide greater certainty in identifying where persons are brought within scope of the transfer pricing rules as a result of “acting together” in relation to financing arrangements.

Under the new rules, parties will be determined to be acting together where there are parallel equity interests in respect of financing arrangements, which, if aggregated, would lead to the participation in the management, control or capital of the borrower.

The intended target of this amended rule is where parallel equity interests have influenced the pricing of a debt transaction.

Detailed explanation as to how the provision operates

Where TIOPA10/S161 applies, a person with a qualifying interest in a body corporate or firm will be regarded as indirectly participating in the management, control or capital of that body company or firm for the purposes of:

  • TIOPA10/S148(2) or (3) (participation condition)
  • TIOPA10/S175 (application of section 174 where guarantee disallowed)
  • TIOPA10/S219 (2)

However, this only applies in relation to financing arrangements for that same borrower to which that person and other persons with a qualifying interest in that borrower are party. 

TIOPA10/S161(1) applies when:

  • one or more persons act together, or have acted together within the previous six months, or
  • if all the rights and powers of those acting together were attributed to one person, then this new person would be taken to have control the borrower.

In determining the rights and powers of a person in the financing arrangement, you must include any other person’s rights and powers that would be attributed to that person under TIOPA10/S159(2).

Two persons with a qualifying financial interest in another person, will be considered to be acting together when any of criteria (a)-(c) are met:

(a)  they are connected as defined by TIOPA10/S163,

(b)  one person is able to secure that another person will act in accordance with their wishes, or it can be reasonably expected that another person will act in accordance with the wishes of the other, or

(c)  It is reasonable to suppose that a financing arrangement has been designed to affect the value of their rights or interests in relation to the borrower, or relates to the exercise of their rights in relation to the borrower.

However, for these purposes no account is to be taken of any rights or powers conferred in relation to property of one of them under security given for a loan.

A person has a qualifying interest in a company if it is reasonable to suppose that person possesses (or can acquire at a later date) any of the share capital or voting power in the company, or if they would receive an amount of the disposal proceeds if the whole of the share capital of the company were disposed of. These proceeds need not be received directly or at the time of disposal, but exclude those arising under a normal commercial loan arrangement as defined by CTA10/S159(4)(b).

A person has a qualifying interest in a firm if, other than as a result of the terms of a normal commercial loan, they would receive any income if the whole of the income of the firm were distributed or they would receive (directly or indirectly) any amount of the assets of the firm in the event of a winding up of the firm.

 

Commencement date

The amendments made have effect in relation to chargeable periods commencing on or after 1 January 2026.

 

Consequential changes

Minor amendments have been made to:

  • TIOPA10/S158
  • TIOPA10/S163 and
  • TIOPA/219

 

Previous rule, including links as appropriate to current INTM

The acting together rules were previously at TIOPA10/S161 and TIOPA10/S162. Guidance is at INTM413180.