Taxation (International and Other Provisions) Act 2010 section 332AA

Change of accounting standards: investment entities

Section 332AA addresses the transfer pricing treatment of investment entities that experience a change in accounting standards, ensuring that the move to fair value accounting under new standards does not create unintended tax consequences for connected-party transactions.

• Where an investment entity changes accounting standards and begins measuring subsidiaries at fair value rather than consolidating them, this section ensures transfer pricing rules apply appropriately to the transition.
• The provision applies specifically to entities that become "investment entities" under new accounting standards such as IFRS 10, which requires them to measure investments in subsidiaries at fair value through profit or loss.
• The section prevents the change in accounting treatment from automatically triggering adverse transfer pricing adjustments on transactions between connected parties that were previously consolidated.
• This measure was introduced by the Finance (No. 2) Act 2017 to deal with practical issues arising from changes in international accounting standards affecting how investment entities account for their subsidiaries.