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HMRC internal manual

Corporate Intangibles Research and Development Manual

HM Revenue & Customs
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Intangible assets: related party rules: market value rule: interaction with transfer pricing code


As explained in the section of the manual on international issues the transfer pricing legislation (TIOPA2010/PART4) applies to transactions within Part 8, as it does to other transactions of an income nature for the purposes of CT (see CIRD47060).

It is possible that, in the case of a transaction between related parties, the price to be placed on the transaction for corporation purposes could be different under the transfer pricing rules determining the arm’s length consideration from that under the market value rule in Part 8 described in CIRD45030.

Part 8 therefore provides that transfer pricing rules in TIOPA/PART4 take precedence over the market value rule. That is the case where:

  • the price of a transaction actually needs to be adjusted under TIOPA/PART4, or
  • no adjustment is required under TIOPA/PART4 because the consideration actually given was an arm’s length amount but, had the transaction not been on arm’s length terms, a transfer pricing adjustment would have been possible.

This means that it will be the transfer pricing legislation, not the market value rule in Part 8, which determines the acquisition cost or realisation value of an asset transferred between a UK resident company and a related party outside the UK tax net.