Explanatory note

UK transfer pricing rules are based on the internationally agreed arm’s length principle, which is now set out in Article 9 of the Model Tax Convention on Income and on Capital 2010^f1. Guidance on applying the arm’s length principle is set out in the Organisation for Economic Co-operation and Development (“OECD”) Transfer Pricing Guidelines, which are periodically updated and republished, and are referred to in UK transfer pricing legislation.

UK transfer pricing rules operate by comparing the actual provision, by means of a transaction or series of transactions made or imposed as between two connected parties, with the arm’s length provision which would have been made as between two independent parties (see section 147 of the Taxation (International and Other Provisions) Act 2010 (“TIOPA”)).

The OECD published a new version of its Transfer Pricing Guidelines on 20th January 2022. The Order designates those guidelines for the purposes of the definition of “the transfer pricing guidelines” in section 164(4)(a) of TIOPA.

The Order has effect (in relation to provision made or imposed at any time)—

The Order also revokes and replaces the Taxation (International and Other Provisions) Act 2010 Transfer Pricing Guidelines Designation Order 2018 (S.I. 2018/266).

A paper copy of the OECD Transfer Pricing Guidelines 2022 is available for inspection at: His Majesty’s Revenue and Customs, 100 Parliament Street, London SW1A 2BQ. The OECD Transfer Pricing Guidelines 2022 are also available to review free of charge on the OECD website at: https://www.oecd.org/tax/transfer-pricing/oecd-transfer-pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm.

A Tax Information and Impact Note covering this instrument has not been prepared for this instrument as it contains no substantive changes to tax policy.