The UK rules covering Transfer Pricing between companies in the same multinational enterprise (MNE) are based on international standards set by the Organisation for Economic Co-Operation and Development (OECD)
Providing goods and services to companies in the same group is part of normal commercial practice. However, some MNEs try to manipulate the prices charged to reduce the tax they have to pay.
HMRC regularly examines corporate tax returns to ensure there is no transfer price manipulation and the right amount of tax is paid
As a result of successful HMRC challenges an extra £5.8 billion in tax has been secured by the specialist Group that examines transfer pricing since it was set up in 2008, including £1.1 billion in extra tax demands in 2014
Financial Secretary to the Treasury David Gauke said
“All companies, big or small, must pay the tax they owe and we will pursue those who abuse the rules.”
“We gave HMRC additional funding to challenge multinational groups to ensure the rules are followed and the right tax paid, but we are going further to ensure multinationals pay their fair share.”
“The government’s new tax on profits earned in the UK but diverted abroad will combat those trying to avoid paying what is owed to the public purse.”
The UK government is clear that MNEs that do business in the UK should pay their fair share of tax. This is why it is taking action to address the concern that some businesses pay little or no tax on profits made in the UK. From April 2015, multinationals face a 25% tax on profits generated in the UK which they then shift out of the country to avoid paying UK tax.
See my May 19th 2015 note at uktp4u.com on the Diverted Profits Tax for more detail.
Source: HMRC Press Release • Mar 06, 2015 10:02 GMT