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HMRC internal manual

Oil Taxation Manual

Non-residents working on the UK continental shelf: transfer pricing: introduction

This section deals with the application of the transfer pricing provisions in TIOPA2010\S147 onwards to transactions between non-resident companies carrying on activities on the UK continental shelf and their non-resident affiliates.

These provisions apply, among other things, to transactions between a UK branch of a non-resident company and an affiliated overseas company. Since a non-resident company within the charge to UK tax by virtue of CTA2009\S1313 is deemed to carry on a trade through a UK branch, TIOPA2010\S147 also applies to transactions between that deemed branch and an affiliated overseas company

Under TIOPA2010\S147, the basic transfer pricing rule is to be construed in a manner consistent with the effect given in the arm’s length principle as expressed in the Organisation for Economic Cooperation and Development Model Tax Convention (the OECD Model) and elaborated in the OECD Guidelines which support the model. The main internal guidance on transfer pricing is in the International Manual at INTM430000 and INTM460000.

Companies are also required to ensure that in filing their returns any inter-affiliate transfer prices are adjusted to an arms length price in accordance with OECD principles. In the absence of any self-assessed adjustment to an arms length price, HMRC will consider whether the transfer price understates the profit attributed to the UK and whether an enquiry is necessary to determine the correct arms length price.

The following pages do not attempt to deal with the whole subject but give the HMRC view on transactions of particular relevance to offshore contractors.