OT20331 - Corporation Tax General: Transfer Pricing. Pre-CTSA

For pre CTSA periods the various modifications of the normal transfer pricing rules for oil companies are mainly to be found in ICTA88\771:

1. the normal rule that s770 cannot apply to a transaction with a UK trading company is disapplied in the case of ring fence companies. This means that S770 can apply to transactions between a ring fence company and any other UK company [s771(3)]. A corresponding adjustment could be made in the case of the other UK company [s771(4)].
   
   
2. (S770 is however disapplied in the case of transactions within ICTA88\s493 [s770(2)(c)].. S493 requires market values to be used for all non arm’s length oil and gas disposals from the North Sea, but differs in various ways from s770. For example it does not require a Board’s direction; it contains special rules to determine how market values are to be calculated; it does not follow the "one way street" approach of s770 (see OT20332).
   
   
3. in the case of oil companies s770 can be applied to transactions between the overseas branch of a UK resident and an associated UK resident [s771(3)].
   
   
4. S771(6) sets out various special valuation rules, mainly intended to address the problem of inflated OPEC "posted prices". And s771(5) extends the normal control test so that s770 can apply to sales of oil produced by a company in which the buyer and its associates have an interest of 20% or more. These provisions will not normally apply to North Sea companies, since their non arm’s length oil sales will be within s493.