The HM Revenue and Customs published a consultation documentation recently which reflects the intent of the UK government to start focusing more on transfer pricing.
At a high level, the intended changes once implemented would require taxpayers to provide more information on a timely basis in a standardised format.
UK taxpayers will also be expected to maintain an ‘Evidence Log’ and an ‘International Dealings Schedule’. The consultation documentation in its existing form is targeted towards MNEs which fall within the country-by-country reporting obligations, but the scheme may well be rolled up to include other MNEs in the future.
Why has this action been taken now?
HMRC recognises that transfer pricing is a major source of tax uncertainty for large UK businesses and a significant area of tax risk for HMRC. To date, absence of any specific transfer pricing documentation requirements, and supporting guidance, has created a degree of uncertainty for UK businesses regarding the appropriate transfer pricing documentation they need to keep, leading to inconsistency of approach.
The proposed changes mean that HMRC would require UK businesses in scope to keep certain information relating to transfer pricing matters in standardised formats.
In addition, UK businesses will be required to extract information from existing records and present it to HMRC promptly in a consistent manner. It is expected that introducing these requirements whereby UK businesses file an annual return summarising their cross-border transfer pricing transactions with associated businesses would align the UK with the practices of comparable jurisdictions and could lead to fewer and more targeted compliance interventions.
At the same time if the data is presented in a standardised format, it will enable HMRC to use more data driven autonomous risk assessment and profiling.
DOWNLOAD OUR SUMMARY OF THE KEY POINTS FROM THE CONSULTATION PAPER OR COMPLETE OUR ONLINE ENQUIRY FORM TO GET IN CONTACT WITH THE TEAM
Download now
Focus on Transfer Pricing Update
