HMRC

How clear is your Transfer Pricing documentation?

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Until recently I was a Senior Transfer Pricing Specialist with HM Revenue & Customs. I have HMRC TP risk-assessing and case-working experience for most business sectors and transaction types and was a member of HMRC’s TP Governance Panel, which has the final say on most TP enquiries.

I have now decided to specialise in helping MNEs and their advisers prepare their “final” TP documentation for HMRC eyes.

You may think your TP Documentation is clear and complete; but HMRC may think otherwise. Many TP enquiries are opened or extended by HMRC because the full facts and circumstances of the business and its transfer pricing are absent from or not clearly presented in the documents provided. Ironically, on establishing the facts it often becomes clear to HMRC that the pricing is actually at arm’s length and the enquiry can be closed without adjustment. Unfortunately, considerable time and money will have been expended on the enquiry in the meantime.

Such enquiries can be avoided or cut short.

I can “sense-check” your TP documentation; issues that might otherwise trigger “TP risk” alarm bells within HMRC will be identified and can be corrected, clarified or expanded as required, before submission to HMRC, to better demonstrate your principled and objective approach to achieving the appropriate arm’s length pricing.

To find out how I can help you please use the “contact me” tab above or email me directly.

Gordon McLeman 08 December 2017

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UK Royalties Withholding Tax – Consultation

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Source: HMRC Press Release, 1 December 2017

This consultation relates to the circumstances in which royalties and other types of payment made to connected persons not resident in the UK have a liability to income tax.

The UK government will introduce legislation in Finance Bill 2018-19 that broadens the circumstances in which certain payments made to non-UK residents have a liability to income tax.

These changes will have effect from April 2019. The consultation focuses on the design of that legislation.

The government welcomes comments from those who would be affected by these changes, including companies, advisors and representative bodies.

The consultation runs from 1 December 2017 to 23 February 2018.

Details of the Consultation here

 

How would your TP Documentation stand up to HMRC Audit?

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Netherland vs. A BV, October 2017, Lower Court, case no 2017: 5965

In this recent transfer pricing case the Dutch Courts reduced the tax authority’s adjusted assessment of €188.3m down to €32.1m

The basic facts are:

  • A Dutch parent company had provided services to foreign subsidiaries on a cost-plus basis.
  • The parent received compensation when a business restructuring transferred its HQ and strategic functions to Switzerland.
  • The Dutch Tax Authorities concluded that this compensation was not enough and that the parent continued to perform strategic functions for the group.

However, the Court ruled that:

  • the parent had fulfilled its legal obligations by preparing thorough transfer pricing documentation.
  • that the burden of proof was on the Dutch tax authorities and
  • the tax authorities did not provide sufficient arguments to support their adjustment.

This outcome illustrates the importance of ‘preparing thorough transfer pricing documentation’ and, although it’s a Dutch example, the principle holds good across jurisdictions.

If you are interested in finding out how your TP documentation might fare if audited by HMRC then read on…… Read the rest of this entry »

UK Budget 2017: Tech giants targeted over royalties

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Source: bbc.co.uk 23 November 2017

The UK government is taking steps to increase the tax it collects from firms doing business online. Rules to prevent online sellers avoiding VAT have also been tightened.

From April 2019, technology groups such as Google and Apple will pay a new withholding tax on the royalty payments they make to their subsidiaries in low-tax jurisdictions.

HMRC will also hold online marketplaces such as eBay and Amazon responsible if sellers using their platforms fail to pay Value Added Tax on their sales.

Chancellor Philip Hammond said: “Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed and some of those relate to UK sales.

“This does not solve the problem, but it does send a signal of our determination and we will continue work in the international arena to find a sustainable and fair long-term solution.”

Source article here

 

£Billion win for UK taxpayers

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Source: HMRC Press Release 15 November 2017

HMRC had already defeated the partnerships’ excessive claims to loss relief from investing in films and the Supreme Court has today (15 Nov 2017) agreed with HMRC’s actions in challenging tax deduction claims arising out of the failed schemes.

The Supreme Court’s decision means that attempts to use technical and procedural points to avoid payment of the correct tax at the correct time have failed. Read the rest of this entry »