HMRC revises cost of transfer pricing in underpaid tax
The revised figure of more than £1.1bn now judged to be “at risk” by HMRC is an increase of 12% on 2012 and 65% on 2011, according to figures calculated by law firm Pinsent Masons. A crackdown on intra-group payments was announced in the chancellor’s Budget earlier this month as part of the government’s pledge to tackle tax avoidance Transfer pricing concerns the charges made between different parts of a multinational business, which can impact on the levels of corporation tax paid. In recent years companies such as Amazon, Starbucks and Google have been accused of arranging their transfer pricing systems to minimise the amount of tax they are liable to pay. New legislation will make any international transfers within a group that incur a tax advantage subject to tax in the UK, even if they have already been subject to taxation overseas. Heather Self, partner at Pinsent Masons, said, “HMRC clearly suspects that a significant number of businesses are using their transfer pricing arrangements to avoid tax, and is undertaking a two-pronged attack on what it sees as abuse of the system.” However, Self warned that HMRC’s tough new stance on transfer pricing could impact the UK’s ability to do business on the global stage. She said, “If enacted in their current form, these draft regulations will bring the transfer pricing arrangements of virtually every multinational business into question, which could lead some to question whether the UK is a stable place to do business. “Tax avoidance through transfer pricing is clearly an international issue requiring an international solution, and there are likely to be far-reaching changes in the pipeline.” In January 2013, a freedom of information request issued by Pinsent Masons revealed that over £1bn of UK taxes may have been underpaid through transfer pricing.