The ACT’s view is that it recognises and appreciates the commitment of HMRC to implement a more efficient approach to undertaking transfer pricing enquiries, by 31 December 2007. In addition the ACT is aware of the need for HMRC to respond to and conform with relevant EU Directives and legislation. In general we are supportive of the proposals made by HMRC although we have some specific comments as outlined below.
In general, the case for partial standardisation of documentation is clearly beneficial to UK companies provided that they are not disadvantaged with respect to other EU Revenue authorities and their requirements. In respect of the suggested options concerning the assembling and submission of evidence, our view would be that Option 2 (namely HMRC could request the standard “EU Transfer Pricing Documentation” after a return has been made, and could possibly ask for further information) remains the preferred position. Despite the documentation being standardised we would not wish to see the burden of evidence submission being universally applied and therefore we appreciate the implication that you would apply a selective risk based approach in asking for the information. We would support your ‘New Approach’ of engaging companies in pre-return risk assessments, although we would wish such discussions to be voluntary so that companies can assess what approach is likely to be most cost effective. In addition, we would welcome definition of the application of the proposed rules to relationships between UK entities such that when no tax is at stake we would trust that HMRC will have a flexible attitude on compliance for what for many will just be an extra, non-productive, administrative burden.
We would welcome further definition of the application of the proposed rules to relationships between UK entities
As discussed above, pre-return risk assessment discussion would be helpful but there is a need to recognise a resource issue for SMEs in particular and they should not be penalised by following a post-return process.
The document suggests certain advantages in using bilateral Advanced Pricing Agreements (APAs) but only asks for comment on unilateral agreements - perhaps HMRC could be encouraged to simplify and increase its use of both?
