INTM414120 - Basic transfer pricing rules: OECD principles

S164 Part to be interpreted in accordance with OECD principles

What has been amended, removed, or added in broad terms

TIOPA10/S164 has been amended to clarify how OECD principles apply to UK transfer pricing legislation as follows:

  • The existing position that the OECD Model Tax Convention (MTC) and Transfer Pricing Guidelines (TPG) are interpretative aids regardless of whether there is a treaty in place is made explicit
  • The MTC is to be interpreted in accordance with, or supplemented by, the OECD Commentary on Article 9
  • TIOPA10/Part 4 is to be interpreted in accordance with the most recent versions of the MTC, OECD Commentary, and TPG, adjusted for any reservations, declaration or elections made by the UK on those materials
  • The Treasury can make regulations:
    • regarding the effect of elective provisions in the TPG
    • so that TIOPA10/Part 4 is not interpreted in accordance with specified amendments or replacements of the MTC and TPG (i.e. to ‘opt out’ of updates)

Detailed explanation of how the rule operates

TIOPA10/S164 provides that UK transfer pricing legislation is to be construed in a manner that best secures consistency with:

  • the expression of the arm’s length principle in Article 9 of the MTC and
  • the guidance in the TPG

See INTM412010 for further information.

Finance Bill 2025-26 retains this core concept and provides further clarification on the use of these interpretative aids, as set out below.

TIOPA10/S164(1)(b) confirms the existing legislative position, that Part 4 TIOPA 2010 should be interpreted in accordance with the MTC and TPG regardless of whether a double taxation arrangement incorporating the MTC is in place. This is not a change in HMRC’s approach.

The definitions of MTC and TPG have been updated. TIOPA10/S164 states that the MTC is to be interpreted in accordance with, or supplemented, by the OECD’s Commentary on Article 9 –“Associated Enterprises”, and for the transfer pricing guidelines to be interpreted in accordance with, or supplemented by, such documents as may be published by the OECD.

References to such materials are to be read as references to the most recent versions of those materials. This ensures that the legislation remains aligned with current international standards and does not become outdated. Although, the UK may make provision for any reservations, declaration or elections in relation to those materials.

Reservations, declarations and elections include statements in the UK’s Transfer Pricing Country Profile published by the OECD or any observations made by the UK on the OECD Commentary.

Commencement date

This amendment will have effect for chargeable periods beginning on or after 1 January 2026.

Consequential changes

TIOPA10/S148A is to be read in accordance with TIOPA10/S164.

Previous rule, including links as appropriate to current INTM

See INTM412010 for further information.