INTM467120 - Establishing the arm's length price: gathering your own evidence

Searching for comparables: UK or global companies?

The taxpayer may have produced comparables which are located in different geographical areas.

The OECD Transfer Pricing Guidelines recognise the importance of looking to the market serviced by the tested party when searching for comparables. If a search produces say 35 comparable companies, 8 of which are based in the UK, then it makes sense to consider those 8 companies in isolation in the first instance.

If there are no UK comparables, or the UK comparable companies put forward are flawed in some way, then it may be necessary to consider using comparables in other countries. The aim is compare like with like.

There should be no differences in the market where the taxpayer trades and the market where a comparable company trades which would materially affect the price which would be agreed between independents.

This would include the geographical market and also the level in a particular market place.

You would need to consider whether territorial boundaries actually lead to market differences in a particular case.