RPDT20230 - The Charge to RPDT: adjusted trading profits and losses: transfer pricing between companies

The transfer pricing provisions in TIOPA10/PART4 will apply to a transaction (i.e. a provision made or imposed) between a RPDT company and another company if:

• the RPDT company entered into the transaction as part of its RPDT trade (so that any income or expenditure arising will be taken into account in computing its RPD profits), and
• the other company did not enter into the transaction as part of a RPDT trade (so that any income or expenditure arising will not be taken into account in computing its RPD profit).

In particular, the ‘basic rule on transfer pricing’ described in TIOPA10/PART4/CHAPTER1 applies to transactions between a company whose activities are within the scope of RPDT and one that is not. Broadly speaking, this means that no transfer pricing adjustment will fall to be made unless:

• the two companies are connected (as defined in PART4), and
• the transaction was not on arms-length terms, and
• the transaction confers a potential advantage in relation to UK taxation on one or both of the companies.

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