INTM450105 - Transfer pricing records: local file exemptions - UK to UK transactions

In general, the Local File must include information on all material categories of controlled transactions that the UK entity is party to.

However, information relating to material controlled transactions with another entity does not need to be included in the Local File if each entity meets one of the following criteria (‘the UK to UK exemption’):

• it is a company that is resident in the UK for tax purposes
• it is a trust where the trustees are resident in the UK for tax purposes (see TSEM10020)
• it is a partnership where all of the partners are resident in the UK for tax purposes (see PM281100)

There are specific circumstances where the UK to UK exemption will not apply even when both entities satisfy one of the above conditions.

If both UK entities party to the controlled transaction are members of the same MNE group which meets the CbCR threshold, and:

• one of the UK entities has made an election under section 357A of the Corporation Tax Act 2010 (election for special treatment of profits from patents etc.) or
• one or more of the UK entities is carrying on a ring-fenced trade as defined in section 277 of the Corporation Tax Act 2010 (see OT21000)

the UK to UK exemption will not apply, and the Local File must include information on all material categories of controlled transactions between the two UK entities.

If a UK entity does not have any material categories of controlled transactions, or the only material controlled transactions with related parties are covered by the UK to UK exemption or the APA exemption (see INTM450106), the relevant person is not obliged to keep and preserve the specified transfer pricing records. It is advisable to note the reason (and any supporting analysis) leading to the conclusion that specified transfer pricing records are not required in case of any subsequent HMRC information request.