The UK Treasury has confirmed with the publication of order SI 2022/1147 (the Order) that a new version of the international transfer pricing guidelines is to be used when implementing national transfer pricing legislation.
The Organisation for Economic Co-operation and Development (OECD) published a new version of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022 in January 2022. The guidelines are now to be used by the United Kingdom's tax authority, His Majesty's Revenue and Customs, for the purposes of the definition of "the transfer pricing guidelines" in section 164(4)(a) of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010). The new guidelines will be brought into effect by The Taxation (International and Other Provisions) Act 2010 Transfer Pricing Guidelines Designation Order SI 2022/1147.
The Order comes into effect for accounting periods beginning on or after 1 January 2023 for corporation tax purposes and from 6 April 2023 (the start of the 2023/24 tax year) for income tax purposes.
Transfer pricing rules are based on the arm's length principle. Similarly, the United Kingdom's transfer pricing rules operate by comparing the transactions between connected parties with those that would have been made between independent parties.