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| HMRC
Adopts New Approach to Transfer Pricing Work In 2007 HMRC completed a review of its links with large businesses. This led it to conclude that the impact which transfer pricing enquiries had on the running of their businesses was a major concern for large corporates. Following a public consultation, HMRC announced in October 2007 " that it was pressing ahead with the introduction of a new approach to transfer pricing enquiries. The draft guidance published in the public consultation document in June 2007 has now been adopted. This new approach is to involve: • greater specialisation within HMRC • more emphasis on team work • a focus on issues of higher risk • action plans for enquiries to be agreed where possible with companies; and • active monitoring of progress. To deliver this new approach, HMRC is now launching what it regards as a radical new technical specialism that reaches across its operational, economic analysis and policy units. We understand that a large number of Transfer Pricing Specialists are currently being appointed and arrangements are being made to provide additional training to enhance their specialist skills. HMRC now aims to resolve transfer pricing enquiries within 18 or 36 months, depending on their complexity. However, it would seem that HMRC will expect taxpayers to provide information about their transfer pricing before they decide whether to open an enquiry, so the full period over which a taxpayer finds itself discussing transfer pricing with HMRC may turn out to be longer than the periods now being quoted by HMRC. A new internal governance process started to operate from January 2008 and is aimed at addressing issues around consistency of approach, allocation of resource to risk and wider departmental strategic objectives. HMRC has also stated that in April of this year, it is planning to publish statistics about the average time taken to resolve the transfer pricing enquiries that were settled in the three months from January to March 2008, and the average age of open enquiries at the end of that quarter. While this new approach from HMRC is geared to large corporates in particular, one can anticipate a spin off for medium and smaller enterprises, especially where they are UK subsidiaries of overseas multinationals. The tax profession has long been arguing for better TP expertise within HMRC generally since lack of experience in some quarters has led to investigations being launched where they were not warranted and long delays in progressing other cases. The difficulty usually arises from the fact that TP is, in reality, a matter of business economics rather than tax and is, therefore, an area in which tax inspectors in general have little practical experience. Having said this, there are, within HMRC, inspectors who are extremely knowledgeable on the subject, but given their continuing "leakage" into the more lucrative world of professional practice, there have never been enough in post to cover the territory. HMRC has not made clear how precisely the new specialists will inter-act with colleagues in the Large Business Service offices and at head office - only time will tell. One thing is quite clear, HMRC continues to see TP as a key area warranting its attentions and this can only be because HMRC views it as a significant opportunity to increase tax take. The 'small print' Neither TPS nor its affiliates and employees make any representation regarding the completeness or accuracy thereof and they accept no responsibility for any loss or damage incurred as a result of any user acting or refraining from acting upon anything contained on these pages or upon its omission therefrom. |
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