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Transfer pricing documentation requirements to be made more robust


Published: 24 Mar 2021 Update History

Tougher requirements for transfer pricing documentation will better focus compliance interventions and bring more alignment with international approaches, according to HMRC. ICAEW’s Tax Faculty outlines a new consultation on updating rules.

According to HMRC figures transfer pricing compliance activity has raised additional revenues of more than £6bn over the past five years. With this in mind, HMRC is consulting on updating the documentation rules.

In its new consultation, part of the Tax Day announcements, HMRC outlines that changes to the transfer pricing (TP) documentation rules will enable more targeted compliance interventions, as well as providing greater certainty for businesses and alignment with the requirements of global tax administrations.

Currently, the UK does not require companies to keep any specific TP records although they must retain sufficient records to demonstrate that their returns are complete and accurate under basic principles. The proposed changes would mean that information relating to TP matters would need to be retained in prescribed formats.

A number of measures are being proposed in the consultation document including the requirement for multi-national enterprises within the country-by-country reporting regime (CbCR) to provide a copy of the master and local files on request. HMRC suggests a timeframe of 30 days might be reasonable for such a request but is seeking views on this.

HMRC is also considering requiring businesses to prepare an international dealings schedule (IDS). This would collect specific data in a set format with a view to giving HMRC a clearer and upfront understanding of the types and levels of intra-group arrangements in place.

This should enable HMRC to focus its compliance resource on higher risk areas and reduce the time to resolve TP enquiries. More accurate risk assessments may even reduce the number of enquiries opened in the first place.

In the consultation HMRC seeks further views around the implementation of any IDS requirement including the information to be disclosed, its format and submission method together with the scope and reporting thresholds.

ICAEW’s Tax Faculty looks forward to working with HMRC in more detail on this consultation. Please send any comments on this consultation to richard.jones@icaew.com.

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