Transfer pricing operational guidance: Evidence gathering:: Searching for comparables: UK or global companies?
Comparables outside the UK
Businesses sometimes produce comparables which are located in different geographical areas from those of the parties to the transactions under review.
The OECD Transfer Pricing Guidelines recognise the importance of looking to the market serviced by the tested party when searching for comparables. In the case of a UK company it normally makes sense to consider UK comparables only in the first instance.
If there are no UK comparables, or the potential UK comparable companies put forward are seriously flawed in some way, then it may be necessary to consider using comparables in other countries.
The aim is to compare like with like. There should therefore be no differences in the market where the business trades and the market where a comparable company trades which would materially affect the price which would be agreed between independents. This would include the geographical market and also the level in a particular market place.
Case teams would need to consider whether territorial boundaries actually lead to market differences in a particular case (and if so whether there is evidence which would allow reliable adjustments to be made to counter those differences.