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On-line tool: Step 2 - Overlooked transactions

Taxpayers must consider not only transactions that they have recognised as being transactions, but in fact anything from which one of the parties has derived a benefit from the other party, for which they would have been expected to make a payment if that other party had not been related to them. 

For instance, the lack of any payment, invoice, or binding contract does not mean there is no transaction.  Therefore, taxpayers need to consider not only the obvious (sales of goods, supplies of services, loans, royalties), but also the less obvious. 

For example, if company A has a small subsidiary, B, then as they are both in “the same family” it may never have occurred to A that it should charge B for things such as:
  • use of A’s offices
  • the time A’s finance staff spend looking after B’s accounts
  • interest on a long-dormant intercompany balance
  • use of A’s brand name
This may be particularly the case if A and B both pay UK tax at the same rate: there may never, up until now, have been a reason for A to go to the bother of working out a charge.


Perhaps the only types of transaction that are clearly not caught are subscription for plain-vanilla share capital and the payment of dividends thereon. 

The scope of the transfer pricing rules is in fact so comprehensive that few parties that are sufficiently associated that they are related will be so autonomous that they have no “transactions” between them.

The 'small print'

The comments on this page and elsewhere on this website are of a general nature.  It is not practicable in a general review such as this to consider every convolution of the UK transfer pricing rules or of any other tax law that may be relevant.  Moreover, these pages naturally do not take into account the specific facts relating to any particular taxpayer.  Therefore, although the guidance in this website should give a good indication of the likely position under the transfer pricing rules, taxpayers should obtain professional advice to verify the position, or carry out their own analysis.

Neither TPS nor its affiliates and employees make any representation regarding the completeness or accuracy thereof and they accept no responsibility for any loss or damage incurred as a result of any user acting or refraining from acting upon anything contained on these pages or upon its omission therefrom.
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