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HMRC internal manual

VAT Cost Sharing Exemption Manual

How the conditions are to be interpreted: Direct Reimbursement of Costs: What is transfer pricing and does it apply to services supplied by a CSG to its members?

Transfer pricing is a direct tax provision and broadly concerns the terms that connected parties use when they conduct business with each other. Where the parties to the transaction are connected, the conditions of their commercial relations will not be determined solely by market forces. The price, terms and conditions of a transaction between connected parties may not be the same as those which would have been agreed at ‘arm’s length’ between independent parties.

Where a CSG and its members are connected parties they will often be potentially subject to transfer pricing rules for direct tax purposes.

Further information about transfer pricing can be found in the International Manual.