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HMRC internal manual

Tonnage Tax Manual

The ring fence: Transfer pricing

Duty to notify connected parties

TTM07300 explains that the normal transfer-pricing rules in TIOPA10/PART4 also apply to transactions between UK persons where one of those persons is a tonnage tax company (and the relevant control conditions etc. are met).

This means that an UK company outside tonnage tax or an individual in the UK may have to make a transfer-pricing adjustment in its self-assessment.  They will only know that they have to do so if they know that the connected company they are dealing with is within tonnage tax.

FA00/SCH22/PARA60 therefore imposes a duty on a tonnage tax company to give notice that it is a tonnage tax company to all parties that might be affected by the transfer pricing rules in paragraph 58.  Broadly speaking, this means it should notify connected parties taxable in the UK with whom it has business dealings.

Form of notice

The notice must state-

  • that the company has become a tonnage tax company, or
  • that an election has been made under this Schedule as a result of which the company will become a tonnage tax company, and
  • information as to the possible application of the provisions of TIOPA10/PART4 in relation to transactions between the company and that person.

Time limit

The company must give notice to every person whose tax liability may be affected within 90 days of

  • making a tonnage tax election, or
  • the occurrence of any other event, as a result of which a company enters, or is taken to have entered, tonnage tax.

(A company may enter tonnage tax without itself making an election, for example as a result of the application of the rules dealing with mergers; see TTM12300)

Failure to give notice

The notice will help recipients to complete their tax returns, as they will then be aware that they have to make adjustments to account for non arm’s length transfer pricing.

There is no sanction within the Taxes Acts if a tonnage tax company fails to notify all relevant parties, as this would be difficult to administer.  However, if a tonnage tax company fails to issue such a notice, it may be open to any disadvantaged party to take its own legal action in respect of such failure.


FA00/SCH22/PARA60 (duty to give notice) TTM17341