HMRC approach to Transfer Pricing issues
HMRC have introduced an internal Board to assist in cases involving international Transfer Pricing issues.
The Board is responsible for:
– reviewing international risks;
– ensuring consistency; and
– ensuring they are either resolved or litigated within 18 or 36 months (depending on the complexity)
HMRC have also published guidance outlining the practices and procedures to be adopted by HMRC officers. The objective is to ensure that transfer pricing enquiries are worked most effectively. This will typically mean that transfer pricing enquiries will normally be settled in 18 months with only the most complex cases taking 36 months, or else a decision taken to litigate the case to bring it to a conclusion.
The new guidance sets out what should be common key elements across all transfer pricing enquiries.
• Risk assessment – HMRC will match resource inputs to the needs of the enquiry depending upon the quantum, transaction (nature, complexity etc) and behaviour risks identified in each case;
• Business Case – ie: sufficient evidence that the case is of sufficient value and importance to HMRC
to open an enquiry, given the resource commitment needed to conduct the enquiry;
• Timetable and action plan – These will act as “roadmaps” for the enquiry, and ensure active management of enquires and show when an enquiry is expected to be completed;
• Six monthly reviews – when decisions will be made as to how the enquiry should continue;
• Resolution decision – this will occur when sufficient information is available and sufficient analysis has been carried out, for HMRC to form a view how to progress towards resolution.
The options for resolution of each case will be either to:
• close the enquiry without adjustment;
• seek a negotiated settlement with the business; or to
• progress to litigation.
Additionally all cases will pass through a series of ‘stage gates’ corresponding to each of the enquiry elements described above. And the decision at each stage gate will be subject to review and approval.