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HMRC internal manual

International Manual

Transfer pricing: legislation: rules: exemptions: pre existing dormant companies


Section 480 of the Companies Act 2006 relieves a dormant company of the requirement to obtain an audit provided the conditions set out in that section are met. An explanation of HMRC’s view as to what constitutes a dormant company can be readhere]

The exemption

The application of transfer pricing rules to a dormant company might result in the company losing its dormant status. For example, where a dormant company has lent money to another company in the same group, or holds intangible property used by a connected business, transfer pricing rules would generally require the dormant company to receive or impute income, for tax purposes.

However, from 1 April 2004 companies that were dormant, either for the whole of an accounting period that ends on 31 March 2004 or for the 3 months ending on 31 March 2004, will be exempt from the transfer pricing requirements of TIOPA10/S147(3) and (5) for as long as they continue being dormant. This exemption is set out in TIOPA10/S165.

A dormant company will lose this exemption if at any time after 1 April 2004 it ceases to be dormant. If it becomes active after 1 April 2004 and goes back to being dormant again, the exemption is not available.