UK and International Tax news

HMRC Consults On Transfer Pricing Documentation

Wednesday 14th April 2021

HMRC has launched a consultation on proposals to update transfer pricing documentation requirements.

In 2015, the OECD presented a package of measures in response to the G20/OECD BEPS Action Plan including a requirement to develop rules regarding transfer pricing documentation. The final report on Action 13 of the Action Plan “Guidance on Transfer Pricing Documentation and Country-by-Country Reporting” introduced a minimum standard for transfer pricing documentation which led to the creation of the CbC reporting regime.

The UK implemented the CbC minimum standard but did not introduce specific requirements regarding the master file or local file because the UK already had broad record keeping requirements. Experience has now shown that the absence of specific transfer pricing documentation requirements and supporting guidance has created a degree of uncertainty for UK businesses as to the appropriate transfer pricing documentation they need to keep.

Comparable tax jurisdictions already require their businesses to file an annual return [International Dealings Schedule] which summarises their cross border transfer pricing transactions with associated businesses. HMRC considers that introducing a similar requirement for UK businesses would align the UK with the practices of comparable jurisdictions and could lead to fewer and more targeted compliance interventions.

HMRC’s latest consultation considers the case for updating and strengthening current transfer pricing documentation requirements in order to provide greater certainty for UK businesses, provide HMRC with better quality data thereby enabling more efficient and targeted compliance interventions and align the UK’s practice more closely with the transfer pricing documentation requirements of comparable tax administrations and the Action 13 Final Report.

Responses to the consultation have been requested by 1 June 2021. HMRC will then review these to determine if there are sufficient grounds to consider updating the transfer pricing documentation requirements.

If you would like more information on the above conslutation, please contact Keith Rushen on +44 (0)20 7486 2378.

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