Taxation (International and Other Provisions) Act 2010 section 165

Exemption for dormant companies

Section 165 provides an exemption from the transfer pricing rules for companies that have been dormant since a specified qualifying period, meaning they do not need to adjust their tax calculations to reflect arm's length pricing.

• Dormant companies are exempt from the requirement to substitute arm's length provisions when calculating their profits and losses for any chargeable period.
• To qualify, the company must have been dormant throughout the pre-qualifying period and must have remained dormant at all times since the end of that period (disregarding any activity that would only arise because of the transfer pricing rules themselves).
• The pre-qualifying period is the company's accounting period ending on 31 March 2004, or if there is no such accounting period, the three-month period ending on that date.
• "Dormant" takes its meaning from section 1169 of the Companies Act 2006, which broadly means the company has had no significant accounting transactions during the relevant period.