HMRC Issues Transfer Pricing Briefing
10 May 2013
Posted by: Author: Amanda Banks
Source: Amanda Banks (Tax-News.com, London)
According to a new briefing from HM Revenue and Customs, the organization has secured GBP4.1bn of additional tax revenue by challenging the transfer pricing arrangements of multinationals since the creation of a dedicated Transfer Pricing Group in 2008.
The tax body is also taking a "leading role" in a review of Organization for Economic Co-operation and Development (OECD) rules on transfer pricing, following a recent OECD report on Base Erosion and Profit Shifting. The OECD's agreed international standard forms the basis for the UK's rules, and recent updates have addressed how tax rules should apply when companies move their operations to other countries and how much profit should be allocated to intangible assets such as patents and trademarks.
HMRC believes that its approach ensures that the UK receives the tax revenue it is due, while also supporting UK businesses trading overseas. The briefing explains that it works with other tax administrations to ensure that UK businesses trading internationally are not subject to double taxation, and to agree on how much of a business's profits should be taxed in the UK. HMRC also has an Advance Pricing Agreement programme, through which the body works with businesses and other tax administrations to agree the transfer prices of transactions in advance.
HMRC warns that it challenges arrangements that do not allocate enough profit to the UK, and that profits may be attributed to a company even if it has only a few employees and does not take an active part in the business. It adds that the UK Government's 2012 Autumn Statement included provision for additional resources to enable HMRC challenge more issues around transfer pricing.