Advance Thin Capitalisation Agreements (ATCAs) are provided in the UK under the Advance Pricing Agreement legislation, to determine in advance the transfer pricing of financial transactions within Part 4 of TIOPA 2010.
The legal basis for ATCAs is provided by the legislation at TIOPA 2010, sections 218 to 230, which provides for Advance Pricing Agreements (APAs) in relation to transfer pricing more broadly.
The ATCA process is initiated by the business, in accordance with TIOPA 2010, section 223, as an application for clarification by agreement of the effect of applying the arm’s length principle to the financial provisions between the business and lenders.
(An article entitled “The HMRC ATCA Process” was published on this website on 12 February 2018, with an accompanying slide presentation on my YouTube channel.)
Transfer pricing should be a concern for all multinational enterprises (MNEs) operating in the UK.
The UK’s corporation tax self-assessment regime requires the taxpayer to ensure that their transfer pricing reflects ‘arm’s length’ prices on all related-party transactions, including UK-UK.
Interest and penalties may be imposed for non-compliance, even for businesses with losses, so there could be serious financial implications if a business does not take its transfer pricing obligations seriously. Read the rest of this entry »
Given the need for countries to protect their tax base in the current economic climate, a continuing aggressive stance by tax authorities to Transfer Pricing can be expected.
So, what actions can a Multi-National Enterprise (MNE) take to minimise its Transfer Pricing risk?
Well, it’s essential to have a Transfer Pricing policy, supported by relevant and appropriate documentary evidence to demonstrate that the outcome is arm’s length. Read the rest of this entry »