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HMRC internal manual

Tonnage Tax Manual

From
HM Revenue & Customs
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The ring fence: Transfer pricing

Between companies

The transfer pricing provisions in TIOPA10/PART4 (as described in TTM07300) will apply to a transaction (i.e. a provision made or imposed) between a tonnage tax company and another person if:
 

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

In particular, the ‘basic rule on transfer pricing’ described in TIOPA10/PART4/CHAPTER1 applies to transactions across the tonnage tax ring fence. 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.

References

FA00/SCH22/PARA58 (transactions between companies) TTM17331
   
Interaction between transfer pricing and finance costs TTM07500