Taxes Consolidation Act 1997 section 835C

Basic rules on transfer pricing

Section 835C sets out the basic transfer pricing rules and the arrangements to which those rules apply.

• The rules apply where associated persons enter into an arrangement involving the supply and acquisition of goods, services, money, assets or anything else of commercial value, and the profits or losses from the relevant activities are within the charge to tax.
• Where the actual consideration payable exceeds the arm's length amount, the acquirer's taxable profits are computed as if the arm's length amount were payable; where the actual consideration receivable is less than the arm's length amount, the supplier's taxable profits are computed as if the arm's length amount were receivable.
• The arm's length amount is determined by identifying the actual commercial or financial relations between the parties and applying the most appropriate transfer pricing method from the OECD transfer pricing guidelines; where substance differs from form, substance prevails, and arrangements that independent parties would not have entered into may be disregarded or replaced.
• Where part of an excess over the arm's length amount is already treated as a distribution under another provision of the Tax Acts, the actual consideration is reduced by that distribution amount before the transfer pricing adjustment is applied.