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HMRC internal manual

International Manual

Transfer pricing operational guidance: Evidence gathering: Using the most appropriate method

OECD methodologies

Case teams should ensure that the most appropriate OECD methodology underpins their conclusions on the arm’s length price. A business is entitled to set its prices in any way it wishes but the results must be arm’s length if they are to be accepted for corporation tax purposes. A business may not necessarily use an OECD method, but any exercise that case teams undertake to put forward an alternative transfer price should be based on the methods approved by OECD. The OECD methods shadow but do not mirror how prices are set between independents.

See the chapter on the OECD Transfer Pricing Guidelines at INTM421000 for more about these methodologies, and INTM484060 for details about their use in transfer pricing reports.