Income and Corporation Tax: updating the transfer pricing guidelines
Published 16 March 2016
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This publication is available at https://www.gov.uk/government/publications/income-and-corporation-tax-updating-the-transfer-pricing-guidelines/income-and-corporation-tax-updating-the-transfer-pricing-guidelines
Who is likely to be affected
Persons who are subject to the transfer pricing rules in respect of a transaction (or series of transactions) with a connected party for purposes of Income Tax or Corporation Tax.
General description of the measure
A transfer price is the price charged in a transaction between 2 parties. The transfer pricing legislation requires that, for Income Tax or Corporation Tax purposes, the prices charged in transactions between connected parties are the same as those that would be charged if the parties were not connected.
The measure will update the definition of “transfer pricing guidelines” to incorporate the revisions to the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the ‘OECD Guidelines’) published by OECD in October 2015.
Policy objective
This measure amends the references within the relevant legislation to incorporate the most recent revisions to the OECD Guidelines which are the internationally agreed standard for application of the arm’s length principle for transfer pricing purposes.
This should provide certainty for business and minimise the potential for double taxation.
Background to the measure
The OECD published revisions to the 2010 version of the OECD Guidelines on 5 October 2015 within its final report following conclusion of the first part of the joint OECD/G20 Base Erosion and Profit-Shifting (BEPS) project.
That report was formally endorsed by G20 Leaders in the communique issued following the Antalya Summit on 15 and 16 November 2015.
Detailed proposal
Operative date
The measure will have effect for section 164(4) Taxation (International and Other Provisions) Act 2010 for Corporation Tax purposes in relation to accounting periods beginning on or after 1 April 2016 and for Income Tax purposes in relation to the tax year 2016 to 2017 and subsequent tax years. For section 357GE(1) Corporation Tax Act 2010 the measure will have effect for accounting periods beginning on or after 1 April 2016.
Current law
Current law is at section 164(4) Taxation (International and Other Provisions) Act 2010 and section 357GE(1) Corporation Tax Act 2010.
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to amend the definition of “transfer pricing guidelines” within the current legislation to incorporate the revisions agreed to the OECD Guidelines by the joint OECD/G20 BEPS project.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|
| nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
The measure is not expected to impact on family formation, stability or breakdown. It is also not expected to have any impact on individuals and households.
Equalities impacts
The measure is not expected to have any equalities impact.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses. Businesses will incur a negligible one-off cost in familiarisation with the new guidelines. There are not expected to be any additional on-going costs. This measure is expected to have no impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
There will be no significant operational impact upon HMRC or other government departments.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Jon Clark on Telephone: 03000 585708 or email: jon.a.clark@hmrc.gsi.gov.uk.