Income and Corporation Taxes Act 1988

Basic rule on transfer pricing etc. U.K.

1 (1) This Schedule applies where—

(a) provision (“the actual provision") has been made or imposed as between any two persons (“the affected persons") by means of a transaction or series of transactions, and

(b) at the time of the making or imposition of the actual provision—

(i) one of the affected persons was directly or indirectly participating in the management, control or capital of the other; or

(ii) the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons.

(2) Subject to paragraphs [F1 5A, 5B,] 8, 10 and 13 below, if the actual provision—

(a) differs from the provision (“the arm"s length provision’) which would have been made as between independent enterprises, and

(b) confers a potential advantage in relation to United Kingdom taxation on one of the affected persons, or (whether or not the same advantage) on each of them,

the profits and losses of the potentially advantaged person or, as the case may be, of each of the potentially advantaged persons shall be computed for tax purposes as if the arm’s length provision had been made or imposed instead of the actual provision.

(3) For the purposes of this Schedule the cases in which provision made or imposed as between any two persons is to be taken to differ from the provision that would have been made as between independent enterprises shall include the case in which provision is made or imposed as between any two persons but no provision would have been made as between independent enterprises; and references in this Schedule to the arm’s length provision shall be construed accordingly.

Textual Amendments

F1 Words in Sch. 28AA para. 1(2) inserted (with effect in accordance with s. 37 of the amending Act) by Finance Act 2004 (c. 12), s. 31(2)