Transfer Pricing and Corporation Tax Self Assessment
The UK transfer pricing legislation has recently been modernised to bring it in line with Corporation Tax Self Assessment (CTSA). For pre CTSA periods (that is for accounting periods ended before 1st July 1999 or for years of assessment 1998/1999 and before) the legislation governing the arm’s length pricing of cross border transactions involving goods and services between affiliates is at Section 770 to 773 ICTA 1988. For CTSA periods (that is for accounting periods ended after 30th June 1999 or for years of assessment 1999/2000 and after) the legislation is at Schedule 28AA ICTA 1988 (or Schedule 16 FA 1998). The legislation governing the arm’s length provision of cross border finance between affiliates is at Section 209(2)(da) ICTA 1988 and Schedule 28AA ICTA 1988.
The new legislation brings transfer pricing within CTSA. This means that for CTSA years companies are required to apply the arm’s length standard when making their self-assessments. In practice this means that companies must consider which (if any) of their transactions fall within the scope of the legislation and then consider whether the terms of those transactions are in accordance with the arm’s length principle. If they are not, an adjustment to taxable profit may be required.
For further information:
Tax Bulletin October 1998. This provides guidance on how the CTSA documentation requirements apply to transfer pricing.
Tax Bulletin December 1998. This provides guidance on how the CTSA penalty provisions apply to transfer pricing.
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