Profit diversion and transfer pricing – latest HMRC drive to ensure compliance
A new Profit Diversion Compliance Facility was introduced yesterday (10 January) to allow businesses to remedy any transfer pricing non-compliance without prompting an investigation by HMRC. Anyone using the new facility can do so by making a full and accurate disclosure of additional corporation tax liabilities. The facility is intended to be used by companies active on an international level who, as a result of incorrect transfer pricing of intra-group transactions, may have reduced UK profits by under-rewarding UK activity and over-rewarding activity based in an overseas entity.
Group companies most likely to be within HMRC’s sights are technology businesses who generate significant profit from intellectual property with cross-border income flows. However any company with cross border intra-group transactions that are not on arm’s length basis could attract HMRC scrutiny, particularly if they are large or if low-tax jurisdictions are involved.
Please contact us if you wish to discuss your transfer pricing arrangements, whether in the context of making a disclosure under the facility or simply to ensure that your transfer pricing arrangements are robust and in accordance with OECD norms.