Taxation (International and Other Provisions) Act 2010 section 205

Provision made or imposed between ring-fence trade and other activities

Section 205 applies transfer pricing rules where an oil company allocates costs, income or other provisions between its ring-fence trade and its other activities, by treating those activities as if they were carried on by two separate persons.

• Where a person carries on an oil-related ring-fence trade and makes or imposes any provision between that trade and any other activities they carry on, the transfer pricing rules apply as if the ring-fence trade and the other activities were conducted by two different persons controlled by the same person.
• The provision between the two notional persons is treated as if it were a transaction between connected parties, with each person deemed to have a potential advantage in relation to UK taxation.
• The transfer pricing rules only apply if the result is that the profits of the oil-related ring-fence trade are increased, or the losses of that trade are reduced (including to nil), for any chargeable period.
• Where there would not otherwise have been any profits from the ring-fence trade, a resulting amount of more than nil counts as a "larger amount" for these purposes, meaning the rules can create profits where none previously existed.