RPDT20220 - The charge to RPDT: adjusted trading profits and losses:application of transfer pricing principles for RPDT

Transfer pricing rules are aimed at preventing connected parties manipulating prices so as to minimise income within the charge to RPDT and maximise the taxable profits that are not charged to RPDT, only to the normal rate of Corporation Tax.

The transfer pricing provisions in TIOPA10/PART4 are therefore applied by FA22/SCH9/PARA3 to cover transactions between persons in a group where only one of them is within the charge to RPDT (and between divisions within a company carrying on RPD activity and other activities). These provisions are applied as if the counterparty to a transaction not within the charge to RPDT was not within the charge to UK tax.

Scope

The transfer pricing rules apply to transactions (i.e., provisions made or imposed) which are not at arms-length (as defined in TIOPA10/PART4). This means that transactions with companies outside the charge to RPDT may be caught where there is a non-arm’s length relationship with a company within the charge to RPDT. See example below.

Example

Company A (an RP Developer) and Company B (a company in the same group that does not undertake RPD Activities).

Company C is a relevant joint venture company, owned 50 per cent by Company A (but not controlled by Group G), and 50 per cent by a member of Group H (a non-resident group).

Transactions between Company B and Company C may be caught by the transfer pricing rules, even though B and C are not in the same group.

RPDT01100 contains a general introduction to RPDT and a list of abbreviations used.