Taxation (International and Other Provisions) Act 2010 section 167A

Small enterprises: exception from exemption: transfer pricing notice

Section 167A allows HMRC to override the normal transfer pricing exemption for small enterprises by issuing a transfer pricing notice, but only where the transactions in question affect the calculation of patent box profits.

• Small enterprises are normally exempt from transfer pricing rules, but HMRC can remove this exemption by issuing a transfer pricing notice
• A transfer pricing notice can only be issued where the transactions between connected parties affect the calculation of relevant intellectual property profits under the patent box regime
• Once a notice is issued, the small enterprise must calculate its profits and losses for that period using arm's length pricing rather than the actual terms of the transaction
• This mirrors the existing power under section 168 for medium-sized enterprises, but for small enterprises it is limited to patent box-related transactions