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HMRC internal manual

International Manual

Transfer pricing: operational guidance: working a transfer pricing case: transfer pricing documentation

Record keeping and transfer pricing

This section is about the content and form of the records and evidence a business should make available to HMRC in order to demonstrate that the results of transactions with related businesses are determined for tax purposes according to transfer pricing rules (and, in particular, the application of the “arm’s length” principle; see INTM412040). This covers the application of transfer pricing rules both to cross-border transactions and to domestic transactions.

HMRC does not want businesses to suffer disproportionate compliance costs so customers should prepare and retain such documentation as is reasonable given the nature, size and complexity (or otherwise) of their business or of the relevant transaction (or series of transactions) but which adequately demonstrates that their transfer pricing meets the arm’s length standard. Transfer pricing documentation consists of a mixture of records and other information in relation to a period covered by a tax return, and may be created at various times. This variety affects the exposure of a business to the risk of a penalty in relation to documentation. There are four classes of records/ evidence that will need to be considered.

Primary accounting records

  1. These are the records of transactions occurring in the course of the activities of a business that the business enters in its accounting system.
  2. These records are needed to produce accounts, and in particular a balance sheet and a statement of profit or loss, and need to be retained for any audit of the accounts. There are legal requirements concerning the time for which such records need to be retained. The requirements would still be necessary in the absence of any tax rules.
  3. These records include the results (in terms of value) of the relevant transactions. In the context of transfer pricing rules, these are the “actual” results. They may or may not be “arm’s length” results.

Tax adjustment records

  1. These are the records that identify adjustments made by a business on account of tax rules in order to move from profits in accounts to taxable profits, including the value of those adjustments.
  2. These adjustments might include the adjustment of “actual” results to “arm’s length” results on account of transfer pricing rules.

Records of transactions with associated businesses

  1. These are the records in which a business identifies transactions to which transfer pricing rules apply.

Evidence to demonstrate an “arm’s length” result

  1. This is the evidence in which a business demonstrates that a result is an “arm’s length” result for the purpose of transfer pricing rules.

When records and evidence need to come into existence

Primary accounting records would generally be created at the time the information entered the business accounting system. This would be before a tax return was made for the period in question.

If a business were to meet its obligation to make a correct tax return, tax adjustment records and records of transactions with associated businesses:

  • would not need to be created at the same time as primary accounting records,
  • but would need to be created before a tax return was made for the period in question.

Evidence to demonstrate an “arm’s length” result would need to be made available to HMRC in response to a legitimate and reasonable request in relation to a tax return that had been made. Although the business would need to base relevant figures in its tax return on appropriate evidence, the material recording that evidence would not necessarily exist at the time the return was made in a form that could be made available to HMRC. Indeed, if HMRC never made a request, the evidence might never exist in such a form.

The OECD BEPS Action 13 Report, now reflected within the July 2017 OECD Guidelines at Chapter V details a standardised approach for transfer pricing documentation [IEIM 300033].

EU Code of Conduct on transfer pricing documentation

HMRC will also accept documents prepared in accordance with the EU’s Code of Conduct on transfer pricing documentation [‘EUTPD’], which was issued in 2006. Businesses who intend to follow the EUTPD Code of Conduct are invited to inform HMRC of this change by writing to:

HM Revenue and Customs

Business Assets and International

Transfer Pricing Team

S1715, Floor 9, Mail Point 3

Central Mail Unit


NE98 1ZZ


The text of the Code can be read on the EU website.