HMRC

TP Back to Basics – The HMRC ATCA Process

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This article is accompanied by a slide presentation on YouTube. Feel free to use my material for your own in-house purposes, all I ask is that you acknowledge the source. Read the rest of this entry »

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Eight Forum on Tax Administration (FTA) members start a multilateral TP and PE tax risk assurance programme

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UK CbCR filing and notification deadline – 31 December 2017

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The UK has an annual requirement (following BEPS13) for certain MNEs with consolidated group revenue of at least €750m to notify and electronically deliver to HMRC a report of revenue, pre-tax profit and taxes paid in each country in which they operate. Guidance on preparing and filing the reports has been published.

For groups planning to file a report with HMRC for the year ended 31 December 2016, the filing deadline is 31 December 2017 and notifications are also required for the year ending 31 December 2017 by 31 December 2017.

Your HMRC Customer Relationship Manager should be your first point of contact for any questions about notifications, the registration service, the reporting service or HMRC’s rules for completing the XML schema. If you don’t have a CRM, email digitalservice.cbc@hmrc.gsi.gov.uk.

The ultimate group parent is primarily responsible for filing the report with HMRC although the UK entities are required to make a “local filing” where:

  1. the ultimate parent’s country of residence does not require it to file a CbC report,
  2. that country does not have specific exchange of information arrangements with the UK in respect of CbC reporting, or
  3. such arrangements do exist but are not operating effectively.

in which case the UK entity must request from its ultimate parent all the information it needs to complete a full CbC report and file it with HMRC unless another group member has filed the report with HMRC or where a report containing the necessary information has been filed in another country that has effective information exchange arrangements with the UK. If it does not receive the information in time, the UK entity must inform HMRC and must file a report in respect of the UK entities in the group only.

You must make your report using XML format and in the structure, called a schema, published by the OECD. You must follow HMRC’s rules to create a valid template as only reports in this approved format will be accepted for electronic filing.

In accordance with OECD guidance, UK partnerships that are parent entities of multinational groups must also file CbC reports (as well as other group entities that are required to file).

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

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 »

“Reality Check: Has HMRC saved £160bn since 2010?”

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Source: bbc.co.uk 8 November 2017

“It is clear that more money has been raised for the exchequer than would have been if HMRC had done nothing, but the overall figure over seven years should not be seen as more than an estimate.”

Source article here