The statutory provisions governing the current transfer pricing regime are contained within TIOPA 2010, ss 146–217 (Part 4). They are designed to bring about the result that would have occurred had arm's length pricing been employed, by increasing the taxable profit (or reducing the tax loss) of one of the parties to the transaction and providing for the other party to claim a compensating adjustment to its profit (or loss) if it is a UK taxpayer (B4.126). For HMRC guidance on transfer pricing, see INTM410000 onwards.
Transfer pricing legislation—the basic rule
The basic transfer pricing rule requires, in essence, the adjustment of profits or losses in a tax return where1:
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•ÌýÌýÌýÌý a provision (see below) exists between two or more affected persons (see below), by means of a transaction or series of transactions (B4.122), which does not follow the arm's length standard, and
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•ÌýÌýÌýÌý that provision creates a potential UK tax advantage (B4.123) for one or both of those persons
The basic transfer pricing rule
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