In addition to transfer pricing guidance, this page also contains guidance on the application of the arbitrate receipts rule (introduced in the Finance (No.2) Act 2005 to employee share plans – see the updated guidance below on employee share schemes for accounting periods starting on or after 1 January 2005.
Section 40 and Schedule 8 of Finance (No.2) Act 2005 made changes to transfer pricing rules and certain loan relationship rules with effect from 4 March 2005. The changes apply to the financial transactions (including loan relationships) of certain businesses. The following draft guidance has been prepared to help businesses implement the new rules:
'Acting together' and collective control (PDF 15K)
Risk Assessment – persons 'acting together' (PDF 40K)
Final versions of this guidance will be incorporated (or cross referenced) in the International Manual, which will be updated more generally to reflect the changes to transfer pricing rules.
While the guidance remains on this page in draft form, comments can be made on it here
Also, guidance has been published in the Corporate Finance Manual, at CFM5603d, explaining what changes constitute a variation to a contract for the purposes of the transitional provisions of Schedule 8 of the Act.
If you wish to discuss the application of the new rules to actual or planned financial transactions, you can contact: David.Hannigan@hmrc.gsi.gov.uk (Tel 020 7147 2736).
The material published on 4th March 2005 when the changes were first announced is archived (PDF 23K) – but for the full, definitive rules please refer to the Finance Act (No.2)2005. (PDF 786K).
This page was originally set up after Budget 2004 to host draft guidance on changes to transfer pricing rules contained in Finance Act 2004, which apply in relation to calculating tax on profits arising on or after 1 April 2004.
The International Manual has now been updated to reflect those changes, and to incorporate final versions of almost all the draft guidance. (The position regarding guidance on employee share schemes is explained below.) The International Manual is available online.
Guidance in the International Manual on share options granted to employees (INTM464140) applies in respect of the calculation of profits in accounting periods starting on or before 31 December 2004.
Additional draft guidance (PDF 37K) was prepared in 2004 to address the implications of extending transfer pricing rules to UK-UK transactions, including the interface with FA03/SCH23. In the light of comments received on the draft, it has been withdrawn for accounting period beginning on or after 1 January 2005. It should be regarded as final but can only be applied in respect of the calculation of profits arising on or after 1 April 2004 in an accounting period starting on or before 31 December 2004.
New guidance (PDF 82K) (Updated 5/12/05), has been prepared for accounting periods starting on or after 1 January 2005. For these periods this replaces both the guidance in INTM464140 in the International Manual and the additional draft guidance above. It will be incorporated into the International Manual. This new guidance does not apply to earlier periods (ie accounting periods that started on or before 31 December 2004), which are covered by the earlier guidance (INTM464140) referred to above.
This draft guidance (PDF 26K) (Updated 5/12/05) summarises the VAT treatment of balancing payments made under ICTA88/SCH28AA/PARA7A. It will be incorporated into the International Manual.
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