The UK transfer pricing rules can require an adjustment of profits and losses where the basic conditions are met including the statutory participation condition, the actual provision differs from the arm’s length provision and a potential UK tax advantage arises. Statutory exemptions may apply and for chargeable periods beginning on or after 1 January 2026, qualifying UK to UK provision is also generally exempt. Transfer pricing is a specialist area in tax and relies on an experience of similar businesses and activities. The following therefore only outlines the transfer pricing process in practical terms to allow a non-specialist to understand the methodology of a transfer pricing review.

The arm’s length provision is the provision which would have been made or imposed between independent enterprises, interpreted in accordance with OECD guidelines. Application of an arm’s length principle under the OECD guidelines is based on a comparison of transactions between associated parties in a multinational enterprise (MNE) with the transactions which would have taken place between independent parties under the same circumstances; this is known as a ‘comparability