Commentary

B4.127 Exemptions from the UK transfer pricing regime

Business tax
Business tax | Commentary

B4.127 Exemptions from the UK transfer pricing regime

Business tax | Commentary

B4.127 Exemptions from the UK transfer pricing regime

There are exemptions in the transfer pricing legislation to mitigate the compliance burden and other adverse consequences for many of the taxpayers who would otherwise be affected by applying the transfer pricing regime to connected party transactions.

The mitigation takes the form of:

  1.  

    •     exemptions for small and medium sized enterprises and dormant companies (see below)1

  2.  

    •     modification of the basic rule where allowances are restricted for certain oil-related expenditure (see D7.918)2

It should be remembered that many other countries have transfer pricing rules. Therefore cross-border transactions that are exempt in the UK may still be subject to transfer pricing principles overseas.

Exemptions for small and medium sized enterprises (SMEs)

The legislation uses the EU recommended definition of small and medium-sized (subject to certain modifications, see below) and as the EU definition has been incorporated into the UK legislation that defines what is an SME, it continues to apply after the end of the Brexit implementation period. 3.

The EU definition4 imposes two conditions to be small, both of which must be met:

  1.  

    •     the enterprise must have fewer than 50 employees, and

  2.  

    •     either (or both) its turnover and gross assets must be no more than €10M

Medium sized enterprises are those which are not small but meet both of the following conditions:

  1.  

    •     the enterprise must have fewer than 250 employees, and

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