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On-line tool: Step 2 - Indirect transactions

Another point to watch is that indirect transactions can also be caught.  Indeed, there need not be any transaction between the two related parties.

The legislation has been worded so that a series of transactions may have to be taken together and treated as a single composite transaction, even if there is no direct transaction between the two related parties. 

An example might be if Company A pays over the odds to an independent supplier in return for the supplier making a supply to A’s subsidiary, B, on terms more preferential than B would have received on a stand-alone basis.  Even though the legal transactions are with the supplier, not between A and B, the transactions together form a series of transactions that bring about a benefit to B, so the transfer pricing rules might require that A’s profits be increased by the amount by which it overpaid the supplier.

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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