INTM620350 - Offshore Receipts in respect of Intangible Property (ORIP): Exemptions: Income of opaque partnership in full treaty territory

ITTOIA05/Ch2A/S608MA

This exemption applies where UK-derived amounts arising to certain partnerships are fully taxable at a partnership level. The exemption ensures that a Chapter 2A charge does not apply in respect of the same UK-derived amounts at the level of the partners where the partnership is chargeable in a full treaty territory on the amounts. This exemption is not contingent on a claim.

The exemption applies where

• For the purposes of the tax law in a full treaty territory, a partnership is regarded as a separate and distinct entity from the partners, and
• The partnership is resident in that territory throughout a tax year and
• The UK-derived amounts arising to the partnership are chargeable to tax in that territory

For the purposes of this exemption, the residence of the partnership is defined by section 608D(2), reading partnership for person. So, for the purposes of this exemption, a partnership is considered resident in a territory if it is liable to tax there by reason of domicile, residence or place of management. However, it is not considered so resident if it is only liable in relation to sources of income in, or capital situated in, that territory, or if only in relation to income or capital remitted or received in that territory.

Where the conditions of the exemption are met, so that all of the UK-derived amounts of the partnership are chargeable to tax at the level of the partnership in a full treaty territory, the exemption applies.

The exemption operates by disregarding any UK-derived amounts when considering the application of section 608A to the partners of the partnership. The effect is to ensure that no Chapter 2A charge will arise to the partners in circumstances where all of the UK-derived amounts under consideration are taxed at the level of the partnership.

Where a partnership is transparent for UK tax purposes, then it is the residence of the partner that is relevant in determining whether a person is resident in a full treaty territory and within, or outside, the scope of s608A. Therefore, this exemption should not be relevant where a person who is resident in a full treaty territory is a partner in a partnership that is transparent for UK tax purposes.