The UK transfer pricing rules require an adjustment of profits where a transaction between connected parties is not undertaken at arm's length and has created a potential UK tax advantage. TIOPA 2010, Part 4

Parties are treated as connected where they are under common control. Control is defined in CTA 2010, s 1124 and includes majority voting rights and majority rights to distributions. Rights which may be acquired at a later date and rights of connected persons must also be taken into account. TIOPA 2010, s 158

The legislation defines an arm's length price as the price which might have been expected if the parties to the transaction had been independent persons dealing at arm's length, based on OECD principles. TIOPA 2010, s 164

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