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HMRC internal manual

International Manual

HM Revenue & Customs
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Transfer pricing: legislation: rules: meaning of ‘person’

Meaning of “person” in TIOPA10

TIOPA10/S147 refers to provision made or imposed between any two (connected) persons, suggesting a broad scope for the schedule, as the term persons includes bodies corporate, partnerships and individuals.

The reference in S147(1)(d) requires the actual provision to be compared with the arm’s length provision that would have been made between independent enterprises. This merely requires that the comparison is with the transaction that would be entered into by independent enterprises; it does not require that the persons themselves must be enterprises.

Consequently, for example, charities will meet the basic pre-condition of TIOPA10/S147(1)(a) - see INTM412020 - as they are ‘persons’ within the meaning of TIOPA10/S147 regardless of the fact that they will not usually be enterprises.

The basic transfer pricing rule of TIOPA10/S147(3) or (5) will not apply to charities in respect of any of their profits which are exempted from tax (under, for example CTA10/S478) as they will then fail to meet the ‘potential advantage’ requirement of TIOPA10/S147(2)(b) or (4)(b).

A person includes both individuals and legal persons such as companies. Person also includes a body of persons.

TIOPA10/S164 requires Part 4 to be construed in accordance with the OECD Model Tax Convention, as interpreted by the OECD Transfer Pricing Guidelines. Article 9 of the convention sets out the arm’s length principle by reference to conditions made or imposed between enterprises. Article 3 defines enterprise as “the carrying on of any business”.