This consultation is about the proposal in the 2006 Review of Links with Large Business for a new approach to transfer pricing enquiries. Effective transfer pricing rules are an essential part of UK tax policy, protecting the tax base and ensuring fairness between companies and between countries.
Businesses want to achieve greater and earlier certainty and are concerned about the cost of complying with transfer pricing rules. Addressing HMRC’s and businesses’ shared objective for improved efficiency and effectiveness involves the whole administration of transfer pricing and not just enquiries into returns.
HMRC is developing new ways of working to deliver this objective, building on the compliance risk assessment framework and litigation and settlement strategy. To achieve the objective, businesses must also play their part in a constructive and transparent relationship, for example by providing information without unnecessary delays.
The new approach will involve greater specialisation and team work on transfer pricing, engagement with companies that wanted on pre-return risk assessment, a focus on issues of higher risk, action plans for enquiries agreed where possible with companies, and active monitoring of progress.
The balance of advantage appears to remain strongly against the introduction of “safe harbours”. When the new approach is fully introduced, it is proposed to abolish Board’s approvals. Information will be published on the number of transfer pricing enquiries open and the time taken to resolve closed ones.
In the international community, the UK will advocate the wider adoption of the principles of the new approach to transfer pricing.