Valuers should continue to assume that HMRC expect a well-supported comparable uncontrolled price (CUP) analysis, say Macfarlanes in a new analysis of current transfer pricing practise and revenue compliance.

If independent transactions cannot be found to support the CUP methods, “resale minus” and cost-plus methods are the next options recommended by the OECD and followed by HMRC. Profit split and transaction net margin methods are recommended for situations with “complex trading relationships involving highly integrated operations,” say the authors. “HMRC is open to exploring other methods if it is considered that they provide a stronger case for application of the arm’s-length transaction.”

There are no plans to change the small and medium business (SME) exemptions. Businesses with fewer than 250 employees or less than £50 million in turnover are not subject to transfer pricing valuations in the UK, with few exceptions.