The UK Government have announced a consultation into UK transfer pricing documentation inviting comments before 1 June 2021. This is long overdue given that unlike many other countries, the UK has no specific TP documentation rule; the requirements governed instead by general legislative record keeping requirements for businesses to prepare and maintain records that enable them to file correct and complete tax returns. It is also more than 5 years since the OECD outlined their BEPS Action Plans including Action 13 which introduced a minimum standard for TP documentation and the Country by Country report for larger Groups.
Proposals include a requirement for businesses to maintain specific standardised documentation on transfer pricing policies which must be provided to HMRC on request and also an additional annual filing which discloses details on material cross border transactions with related parties and therefore gives far more transparency in this area.
From 2015-2020 HMRC has secured over £6 billion in additional tax from transfer pricing enquiries highlighting that this is a key risk area and that HMRC will seek TP adjustments where policies are not documented and supported as being arm’s length.
The Menzies TP team can help review your current TP documentation and ensure you are ready for any changes in rules. For more information please contact Nick Farmer or Emma McCartney below: