Transfer Pricing in the UK

Transfer pricing (TP) rules are required to ensure that associated enterprises do not manipulate the pricing of transactions between them in order to shift profits from one jurisdiction to another.

Transfer pricing is one of the most important and technically challenging areas of tax law. There have also been significant recent developments including:-

• The revision in 2009 and 2010 of the OECD’s TP Guidelines (at present, the UK’s legislation is to be construed in accordance with the Guidelines published prior to these changes but this is expected to change shortly);
• The rewriting of the UK’s rules into TIOPA 2010; and
• The DSG Retail case, being the first case in which the UK’s TP rules have been considered.

Further change is also expected as an OECD working group is currently looking at revising the guidance on intangibles.

The TP rules apply to large enterpirses. Since 2004 they have applied in respect of all transactions, including those between UK enterprises and those involving finance.

The new book will provide practical guidance on the application of the TP rules to UK taxpayers and their advisers. As the TP rules largely apply to large companies and groups, it will be written with managers in mind.

The book will cover three main areas:-

• the UK’s TP rules - comprising detailed commentary based on that in BTR but extended to include examples, flowcharts, etc.;
• how to determine an arm’s length price – comprising detailed commentary on the OECD’s guidelines, supported by case studies, diagrams and, in the on-line version, calculators (eg, to calculate the arm’s length price using certain methods such as cost plus); and
• dispute resolute - comprising detailed commentary on obligations under self assessment (including with regard to documentation), penalties, APAs, ATCAs, DTAs, the mutual agreement procedure and enquiries.

The following external material may also be included in the book:-

• EC Recommendation 2003/361 (used to determine if a company/group is large);
• The decision in the DSG Retail case;
• Statements of Practice 3/99 (APAs) and 01/09 (ATCAs); and
• Extracts from HMRC guidance.