Transfer pricing and joint ventures
Produced in partnership with Sara Stewart of Vinson & Elkins RLLP and Mathew Oliver of Bird & Bird
Transfer pricing and joint ventures

The following Tax guidance note Produced in partnership with Sara Stewart of Vinson & Elkins RLLP and Mathew Oliver of Bird & Bird provides comprehensive and up to date legal information covering:

  • Transfer pricing and joint ventures
  • What is transfer pricing?
  • What type of joint ventures can transfer pricing apply to?
  • When do the transfer pricing rules apply?
  • The participation condition—what relationship is necessary for the transfer pricing rules to apply?
  • What happens if the transfer pricing rules apply?
  • Administration
  • Advance pricing agreements

This Practice Note considers the UK tax aspects of the application of the UK’s transfer pricing rules to joint ventures, including in particular, when the rules apply and the effect of the rules. It is assumed for the purposes of this note, unless otherwise mentioned, that the joint venture parties are UK tax resident corporate entities and that if a joint venture company is established as the joint venture vehicle, then that company is UK tax resident. This Practice Note does not consider companies with special rules, for example companies that pay ring fence corporation tax in respect of oil and gas activities. It also does not consider in detail transfer pricing methodologies generally, which are explained in Practice Note: Establishing an arm's length price for transfer pricing purposes.

What is transfer pricing?

Transfer pricing rules exist in some form in most jurisdictions. Under the UK rules, where associated parties undertake a transaction on a non-arm’s length basis, the transfer pricing rules permit (where the requirements are met) HMRC to adjust, for tax purposes, the price paid under the terms of that transaction in line with arm’s length terms.

The rules are aimed at countering UK tax loss, primarily due to multinational groups which could, in the absence of transfer pricing rules, create high profits in low tax jurisdictions and low