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HMRC internal manual

VAT Valuation Manual

Transfer Pricing - VAT implications: introduction

This guidance has been produced following the extension of transfer pricing rules to transactions on or after 01.04.2004, between UK businesses following Finance Act 2004 (Clause 30) and in particular, the amendment to ICTA 88 Sch 28AA (now at Part 4 TIOPA 10 with effect for accounting periods ended on or after 1 April 2010) and a new para 7A,(now at s196 TIOPA 10) which allows a balancing payment to be made following a transfer pricing adjustment for direct tax purposes.

Transfer Pricing is described in detail in the direct tax International Manual at INTM410500 and following sections. That guidance includes an introduction to the VAT and indirect tax implications of Transfer Pricing for direct tax staff at INT486010. It urges closer co-operation with indirect tax staff on this issue.

The ICTA 88 Sch 28AA legislation (now at Part 4 TIOPA 10) applies to accounting periods ending on or after 01.07.1999. Before this date similar, but slightly different legislation applied. The Sch 28AA legislation originally applied only to transactions between a UK and an overseas entity, UK to UK transactions being exempted. However the Finance Act 2004 ended the exemption. It follows that UK-to-UK transactions were then included in Sch 28AA provisions in respect of calculating CT due on profits arising on or after 01.04.2004.