Transfer Pricing Resources for Great Britain

Government Links

UK Transfer Pricing Regulations

HMRC Tax Bulletins on Transfer Pricing

News and Other Resources

 

Government Links 

Her Majesty's Revenue and Customs (HMRC) Homepage

HMRC's International Transfer Pricing Page

HMRC's Transfer Pricing and Corporation Tax Self Assessment Page

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UK Transfer Pricing Regulations 

1998 Finance Act
Section 108 introduces a comprehensive modernization of the UK’s transfer pricing legislation.

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HMRC Tax Bulletins on Transfer Pricing 

Transfer Pricing and the Arbitration Convention
The Convention provides for independent arbitration to ensure the elimination of double taxation by EU Member States which could arise from a transfer pricing adjustment made by a Member State. Guidance about how the Convention works was provided in Tax Bulletin, Issue 31, October 1997.
Released August 1998

Transfer Pricing Legislation
The 1998 Finance Act (FA 98) introduced a comprehensive modernization of the UK’s transfer pricing legislation.  Under the transfer pricing legislation, taxpayers are required to recognize the arm’s length principle in reporting income, profits or losses for tax purposes.
Released October 1998

Penalties and the Transfer Pricing Legislation
Bulletin details penalties under the UK's transfer pricing legislation.
Released December 1998

Advance Pricing Agreements
This guidance about the procedures relating to bilateral Advance Pricing Agreements draws on the experiences and observations of the Inland Revenue in concluding APAs with its treaty partners under the authority of the Mutual Agreement Procedure of Double Tax Treaties.
Released October 1999

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News and Other Resources 

Landmark Case: Special Commissioners Determine that DSG Retail Breached Transfer Pricing Rules
This is the first major transfer pricing case in the UK to provide guidance on how the HMRC and UK courts will select transfer pricing methods and identify qualified comparables.  DSG’s expert witness had argued for use of the CUP method and provided several comparables to support its selection.  The HMRC rejected the comparables for several reasons, which are detailed in the above link.  HMRC’s expert witness performed a profit split since it was determined no comparables could be identified under the CUP method.  The court decided in favor of the profit split method, but deferred on the issue of how the calculation should be performed.  The method selection is significant because under the OECD Guidelines, transactional methods (such as the CUP method employed by the taxpayer) are preferred to profit-based methods (such as the profit split approach employed by the HMRC).  The HMRC appears to view the profit split method as an adaptable selection that takes into account unique conditions of a tested transaction.  This decision provides information to taxpayers and practitioners on the types of arguments that the HMRC is likely to make on questions of comparables and methodology. 
April 23, 2009

Finance Bill 2009: Loan Relationships, Derivative Contracts and Interest
Amended version of the draft legislation on changes to the loan relationships rules for connected companies relating to late payments of interest, and releases of trade debts.  The HMRC published draft legislation in December 2008 for consultation. The proposal amended the late-interest rule and the similar equivalent rule on deeply discounted securities in the rewritten Corporation Tax Act, which is due to come into effect on April 1, 2009.
March 19, 2009

Tax Law Rewrite News Release - UK Clarifies Transfer Pricing Rules
The Taxation (International and Other Provisions) Bill includes provisions about double taxation relief, transfer pricing, advance pricing agreements and tax arbitrage. It also relocates and where appropriate rewrites some provisions which would otherwise have been left unhelpfully in the Income and Corporation Taxes Act or one of the Finance Acts. Copies of the draft Bills, like all the Tax Law Rewrite project publications, can be obtained free of charge from Jackie Bartlett, (address above) or are also available on the Internet at www.hmrc.gov.uk/rewrite
March 3, 2009

Advance Thin Capitalisation Agreements - Frequently Asked Questions
The UK has created a Business International Directorate with HMRC to address international tax issues, including certain transfer pricing issues.  Those issues include thin capitalisation, financial services transfer pricing and attribution of profits; and the Investment Manager Exemption under Schedule 9 of Finance Act 1996.  This brief also addresses questions about advance thin capitalisation agreements that have arisen since ATCAs were introduced.
January 12, 2009

Thin Capitalisation: Practical Guidance
The main aim of this module is to provide some practical guidance on working thin capitalisation cases. Using the information provided, in conjunction with the acquisition of expertise over a period of time, should enable caseworkers to work most cases to a conclusion.
January 2009

Finance Bill 2009: Draft Legislation Amending the Corporation Tax Rules on Late-Paid Interest Between Connected Companies
The HMRC had earlier released a Consultation Document concerning the rule in paragraph 2 of Schedule 9 to Finance Act 1996 which applies in a number of situations where interest payable by a debtor company to a connected person remains unpaid 12 months after the end of the accounting period, and corresponding amounts are not brought into account for tax purposes under the rules on ‘loan relationships’. In such a case, the interest is deductible for tax purposes when it is paid, rather than when shown in accounts drawn up in accordance with generally accepted accounting practice, as is normally the case under the loan relationships rules. Views were invited on options for amending the rule in cases where the debtor and creditor companies are ‘connected’ (broadly, under common control.  This document provides the responses to the Consultation Document and the draft legislation.
December 11, 2008

Loan Relationships: Draft Legislation on Release of Trade Debts
Comments are invited by January 16, 2009 on changes to the releases of trade debts.
December 11, 2008

Reform of Loan Rules for Connected Companies
The HMRC is to introduce corporate tax legislation that amends the loan relationships rules affecting connected companies. The new rules will apply to the release of trade debts owed between connected companies. The change will also amend the rules on the late payment of interest between connected companies.
November 24, 2008

House of Commons Committee of Public Accounts – Management of Large Business Corporation Tax – Thirtieth Report of Session 2007-08
This report discusses the latest actions taken to contest apparent tax avoidance, which includes legislation to force disclosure of tax avoidance plans, application of transfer pricing rules to cross-border intangible transfers, the introduction of the risk-based approach, and use of the tax penalty regime.
October 21, 2008

Netherlands - U.K. Tax Treaty
The Netherlands and the United Kingdom signed an income tax treaty that will provide for arbitration of competent authority disputes when the accord enters into. 
September 26, 2008

HMRC Issues Updated Guidance Regarding the Conduct of Transfer Pricing Enquiries
This guidance outlines the practices and procedures HMRC has adopted for transfer pricing enquiries in order to achieve the aims of Proposal 5 of the 2006 Review of Links with Large Business. These were greater certainty; an efficient risk based approach to dealing with tax matters; speedy resolution of issues; and clarity through effective consultation and dialogue.
June 10, 2008

Draft Statutory Instrument, The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2008
The UK is creating a new tribunal to hear taxpayer appeals from HMRC notices of inquiry, including those in transfer pricing cases.  Such appeals were previously heard by the Special Commissioners.
June 2, 2008

U.K. Parliament's Select Committee on Public Accounts 30th Report, Management of Large Business Corporation Tax
This report recommends that the HMRC share information on individual high-risk companies with other tax authorities and requires U.K. multinationals to file consolidated tax returns, noting that approximately half of the growth in global trade currently comes from transactions between related parties.
June 2, 2008

Risk Framework Guidance
Provides guidance for large businesses to pay the right amount of tax at the right time and how to manage tax risk to ensure compliance with the law.  HMRC’s aim is to work with its customers to understand how they manage their tax planning and compliance within the wider commercial context in which they operate.  It does not want its interventions to duplicate unnecessarily the work that tax departments and their advisers do to manage tax compliance risks.
December 2007

HMRC Approach to Transfer Pricing Enquiries
The HMRC announced the appointment of transfer pricing specialists and the provision of additional training aimed at enhancing their specialist skills, as part of the introduction of the new approach to transfer pricing enquiries. A new HMRC internal governance process, effective January 2008, addresses issues concerning consistency of approach, allocation of resource to risk, and broader strategic objectives.
October 2007

HMRC Approach to Transfer Pricing for Large Businesses
This consultation document seeks views on a new approach to the administration of transfer pricing enquiries for large business. HMRC welcomes views on these proposals which take forward the key themes of giving increased and earlier certainty to business, moving closer to real-time working and speedier resolution of issues.
June 20, 2007

Changes to Clearance Processes for Financial Transactions
The UK proposed extending its advanced pricing agreement program to settle possible thin capitalization concerns, announcing that unilateral “advance thin capitalization agreements” would allow taxpayers to achieve assurances without having to seek out relief through double taxation treaties.
May 7, 2007

UK/Japan Double Taxation Convention
Signed February 2, 2006, Entered into force October 12, 2006

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