Summer Budget 2015: Transfers of stock and intangibles between connected parties

There are special rules that apply to the transfer of stock for corporation tax and income tax purposes, and transfers of intangible assets for corporation tax purposes.

These provisions (“market value rules”) typically provide that transfers are treated as taking place at market value. However where the transfer pricing legislation contained in Chapter 1 of Part 4 of Taxation (International and Other Provisions) Act 2010 (TIOPA) apply these takes priority over the market value rules.

Where the transfer pricing rules take priority it is possible to obtain a tax advantage by fixing a transfer pricing price which is lower than the market value of the stock transferred.

Legislation will be introduced to revise the interaction between the market value rules and Part 4 of TIOPA so that a further adjustment can be made under the market value rules in CTA or ITTOIA.

The measure will have effect for transfers of trading stock or intangible fixed assets made on or after 8 July 2015.

These amendments will ensure that disposals made other than in the normal course of business are brought to account for tax purposes at full open market value. This amendment will stop corporate groups from using a transfer pricing override to manipulate the value of assets in intragroup transfers.