Revenue news

Transfer pricing

The Government has announced new measures in relation to businesses financed by a related party. These measures will ensure that businesses cannot increase tax relief for their financing costs by arranging their finance through a different structure. The changes will:

• extend transfer pricing rules so that they apply where parties who collectively could control a business act together to finance that business;
• apply transfer pricing rules to financing put in place up to six months before a control relationship exists.

Additional measures will limit an exemption from the rules that restrict relief for late paid interest and discount where the parties are connected.
The changes full details of which can be found on the Inland Revenue's website at www.inlandrevenue.gov.uk/international/transfer-pricing.htm will apply with effect from 4 March 2005 with some transitional protection for pre-existing finance contracts. Legislation to implement...