Taxes Consolidation Act 1997 section 697LA

Transactions between associated persons and between tonnage tax trade and other activities of same company

Section 697LA requires that transactions between a tonnage tax company and associated companies, and between a tonnage tax trade and other activities of the same company, are conducted at arm's length prices.

• Where a tonnage tax company transacts with a company it controls, that controls it, or that is under common control with it, and the tonnage tax company's income is inflated beyond arm's length levels, both companies' income and losses must be recomputed on arm's length terms.
• The same arm's length rule applies internally where a company carries on both a tonnage tax trade and other activities, treating the trade and the other activities as if they were separate persons under common control.
• A tonnage tax company must retain for at least six years detailed documentation showing how prices and terms were determined, and Revenue may demand information and documentation to verify compliance.
• The transfer pricing adjustments made under this section do not affect the computation of the company's tonnage tax profits.