On-line
tool: Step 2 - Overlooked transactions
Taxpayers must consider not only transactions
that they have recognised as being transactions, but in fact anything
from which one of the parties has derived a benefit from the other
party, for which they would have been expected to make a payment if
that other party had not been related to them.
For instance, the lack of any payment, invoice, or binding contract
does not mean there is no transaction. Therefore, taxpayers need
to consider not only the obvious (sales of goods, supplies of services,
loans, royalties), but also the less obvious.
For example, if company A has a small subsidiary, B, then as they are
both in “the same family” it may never have occurred to A that it
should charge B for things such as:
- use of A’s offices
- the time A’s finance staff spend looking after B’s
accounts
- interest on a long-dormant intercompany balance
- use of A’s brand name
This may be particularly the case if A and B both pay UK tax at the
same rate: there may never, up until now, have been a reason for A to
go to the bother of working out a charge.
Conclusion
Perhaps the only types of transaction that are clearly not caught are
subscription for plain-vanilla share capital and the payment of
dividends thereon.
The scope of the transfer pricing rules is in fact so comprehensive
that few parties that are sufficiently associated that they are related
will be so autonomous that they have no “transactions” between them.
The 'small print'
The
comments on this page and elsewhere on this website are of a
general nature. It is not practicable in a general review such as
this
to consider every convolution of the UK transfer pricing rules or of
any other tax law that may be relevant. Moreover, these pages
naturally do not take into account the specific facts relating to any
particular taxpayer. Therefore, although the guidance in this
website
should give a good indication of the likely position under the transfer
pricing rules, taxpayers should obtain professional advice to verify
the position, or carry out their own analysis.
Neither
TPS nor its affiliates
and employees
make any representation regarding the
completeness or accuracy thereof and they accept no responsibility for
any loss or damage incurred as a result of any user acting or
refraining from acting upon anything contained on these pages or upon
its omission therefrom.
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