B4.120 Transfer pricing—overview

Business tax
Business tax | Commentary

B4.120 Transfer pricing—overview

Business tax | Commentary

Part B4     Transfer pricing and profit fragmentation

Contents of Part B4

B4.1     Transfer pricing

B4.2     Profit fragmentation

B4.3     [Removed]

Division B4.1     Transfer pricing

For updates affecting this Division please see Part B0 Updates

Transfer pricing—UK regime

B4.120 Transfer pricing—overview

For the latest New Developments, see ND.1935, ND.1950, ND.2061.

The current transfer pricing legislation is contained in TIOPA 2010, ss 146–217 and applies for corporation tax and income tax purposes. The intention of the legislation is to counter a loss of tax which may arise from non-arm's length pricing in a provision which takes place between persons that are not independent. This is done by comparing the profit or loss from the actual provision made with the profit or loss from a provision made at an arm's length price. If the arm's length provision would result in a higher taxable profit or a lower tax loss then the actual provision is replaced with the arm's length one. Any reduction in profit or increase in loss only comes about through a compensating adjustment.

There are exemptions from the transfer pricing regime with the most relevant being the exemptions for small and medium sized enterprises.

Further details of the UK legislation and the definition of terms are summarised in the table below:

Transfer pricing: the basic rule, meaning of provision and affected personsB4.121
Transfer pricing: transactions or a series of transactionsB4.122
Transfer pricing; meaning of UK tax advantageB4.123
Transfer pricing meaning of participationB4.124
Indirect participation: transfer pricing and financing arrangementsB4.125
Compensating adjustments and balancing paymentsB4.126
Exemptions from the UK

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