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HMRC internal manual

International Manual

Transfer pricing: operational guidance: examining transfer pricing reports: using other methods

Non OECD methods

Generally one of the OECD methods will be found to provide a ‘most appropriate’ solution. However case teams may come across either particularly complex cases, or cases where the group has commissioned a very thorough transfer pricing report, where other methods have been used or one OECD method is used to substantiate another.

A profit split methodology using the ‘contribution analysis’ approach will involve calculating an arm’s length return to reward routine functions; this may be achieved by the use of, for example, cost plus, and/or resale minus.

Depending on the facts of a case, it may be wise to use a mix of methods, or use one method to substantiate another, in order to try to establish a more accurate arm’s length price, for example using a TNMM method to check a resale minus method, or vice versa.

The OECD Transfer Pricing Guidelines do not require the use of more than one method but recognise that the data produced by doing so could be useful for the purposes of more accurately defining the arm’s length range.

Businesses may use methods other than those described in the Guidelines where it can be demonstrated that they both satisfy the arm’s length principle and are more appropriate to the facts and circumstances of the case than any of the methods described in the Guidelines.