International issues: mitigating controversy

HMRC is increasingly focusing on areas of international tax risk when considering the affairs of large businesses: more than 40% of the £34.8bn ‘tax under consideration’ from HMRC’s open investigations arises from transfer pricing and international tax risks. When considering such issues HMRC adopts a risk-based approach to identify potential enquiries with information drawn from multiple sources. The recent tribunal decisions of BlackRock and Euromoney illustrate how HMRC gathers and examines evidence during an enquiry and interprets the facts to argue for a different tax outcome. As much of the relevant legislation to international tax risk contains anti-avoidance main purpose or main benefit tests it is therefore increasingly important for businesses to keep supporting documentation of the commercial objectives and business-led decision making for any and all transactions as this will provide the necessary context and evidence for the tax treatment reported in tax returns. It...