HMRC have published new guidelines for compliance on transfer pricing. Help with common risks in transfer pricing approaches GfC7 sets out best practice approaches to transfer pricing to lower risk and avoid common mistakes.
The guidance is in three parts:
managing compliance risk (aimed at those managing UK transfer pricing risk);
common compliance risks (aimed at specialists and covering planning, analysis and documentation); and
design risks (for specialists and covering common risks in transfer pricing design and implementation.).
Simon Wood, BDO Transfer Pricing Partner, noted that the guidelines include a number of practical examples to help taxpayers minimise transfer pricing compliance risk, with risk reduction recommendations to reduce the likelihood of enquiry, HMRC adjustment and penalties.
‘The key themes that stand out are HMRC’s expectations around properly establishing and checking facts (aimed at the UK business and their advisers), real-time analysis, monitoring for change, appropriate process controls and ongoing monitoring of pricing implementation, robust analysis and evidence gathering, and a desire for higher quality documentation (particularly when performed outside the UK),’ Wood said. ‘These themes are not groundbreaking, but the depth and breadth of HMRC’s “how-to” guidance to light the way is. It is helpful to have many of HMRC’s day-to-day practices that have been evident for some time reflected in the guidance.
Wood noted: ‘The TP GfC also introduces so-called “high-risk indicators” and transfer pricing “trigger events” that face greater HMRC scrutiny and so ought to act as cues to take a closer look. It is understood that HMRC believes that mid-sized businesses in particular will benefit from clearer guidance to aid them in maintaining and retaining appropriate records to support their position.’
‘The guidance is a “work in progress” in that HMRC recognise that there are a number of additional areas which would benefit from dedicated guidance, including financial transaction (thin capitalisation and the pricing of debt), with updates to follow,’ Wood added.
HMRC have published new guidelines for compliance on transfer pricing. Help with common risks in transfer pricing approaches GfC7 sets out best practice approaches to transfer pricing to lower risk and avoid common mistakes.
The guidance is in three parts:
managing compliance risk (aimed at those managing UK transfer pricing risk);
common compliance risks (aimed at specialists and covering planning, analysis and documentation); and
design risks (for specialists and covering common risks in transfer pricing design and implementation.).
Simon Wood, BDO Transfer Pricing Partner, noted that the guidelines include a number of practical examples to help taxpayers minimise transfer pricing compliance risk, with risk reduction recommendations to reduce the likelihood of enquiry, HMRC adjustment and penalties.
‘The key themes that stand out are HMRC’s expectations around properly establishing and checking facts (aimed at the UK business and their advisers), real-time analysis, monitoring for change, appropriate process controls and ongoing monitoring of pricing implementation, robust analysis and evidence gathering, and a desire for higher quality documentation (particularly when performed outside the UK),’ Wood said. ‘These themes are not groundbreaking, but the depth and breadth of HMRC’s “how-to” guidance to light the way is. It is helpful to have many of HMRC’s day-to-day practices that have been evident for some time reflected in the guidance.
Wood noted: ‘The TP GfC also introduces so-called “high-risk indicators” and transfer pricing “trigger events” that face greater HMRC scrutiny and so ought to act as cues to take a closer look. It is understood that HMRC believes that mid-sized businesses in particular will benefit from clearer guidance to aid them in maintaining and retaining appropriate records to support their position.’
‘The guidance is a “work in progress” in that HMRC recognise that there are a number of additional areas which would benefit from dedicated guidance, including financial transaction (thin capitalisation and the pricing of debt), with updates to follow,’ Wood added.
