Transfer pricing operational guidance: Evidence gathering: Searching for comparables: using commercial databases
The easiest way to search for comparable companies is to use a commercial database. These hold information about companies from publicly-available sources. The database can be searched in various ways and the information can be extracted in a user friendly format. Such databases are used for many purposes primarily by businesses, but also by government departments and others. One use is to search for comparables for transfer pricing studies. But the database search must be supplemented by information about specific companies from published sources.
The basis of any alternative model that is constructed involving cost plus, resale minus and transactional net margin method (‘TNMM’) methodologies will need a review of comparables using a commercial database.
This work is usually undertaken by specialists within the Transfer Pricing Group. For HMRC readers, more information is available on the TPG intranet site. Case teams should consult their TP Specialist to discuss a database search.
The search is only a starting point. Never assume that all the companies in the output from a database search are comparables for the tested party. Always review individually, so far as practicable, any company selected by a database search.
Case teams should not allow the use of data from a database search to encourage them to adopt a mathematical or formulaic approach to transfer pricing. They should bear in mind that the aim is to review the price of transactions between connected parties and consider whether the price would have been different between independents. This requires care, thought, analysis and judgement. All of these attributes need to be exercised when searching for comparables.