[INTM501050] Interest imputation: transfer pricing the lender: implicit and explicit loan guarantees
There are three aspects to guarantees for financial transfer pricing, and they easily become confused:
1 – For thin cap purposes
When considering borrowing capacity from a lender's perspective guarantees should not be taken into account; TIOPA10/S152(5) applies.
2 – Transfer pricing of guarantees
Guarantees are subject to transfer pricing in themselves, when the issue is what if anything should be charged at arm's length for a guarantee. These may be intra-group, but they might be third party. This issue is what advantage, if any, the guarantee gives the borrower which it cannot obtain on a stand-alone basis, and what that is worth.