HMRC Releases 2013-14 Transfer Pricing Stats

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Challenges by HM Revenue and Customs (HMRC) to the transfer pricing arrangements adopted by a number of multinational companies secured an additional GBP1.1bn (USD1.66bn) in tax in 2013-14, the UK’s tax authority has said.

In 2008, HMRC introduced an approach to transfer pricing inquiries involving greater specialization and team work, a focus on higher risk issues, action plans for inquiries, and the active monitoring of progress. A specialist group, set up in 2008 to examine transfer pricing cases, has secured more than GBP5.8bn in additional tax since its creation, the tax office said.

The latest HMRC statistics reveal that this group’s transfer pricing yield in 2013-14 was GBP1.14bn. Of this, GBP831m was generated by the large business service, and GBP306m from local compliance activities. In 2012-13, the total amount secured was GBP504m, down from the GBP1.1bn recorded in 2011-12.

As at March 31, 2014, more than 99 percent of cases open as at April 1, 2008, had been settled. In 2013-14, the average age of open inquiries was 18.5 months, compared with 24.8 months in 2009-10. In 2013-14, the average age of settled inquiries was 25.3 months, compared with 33.3 months in 2009-2010.

43 Advance Pricing Agreement (APAs) applications were received in 2013-14. 29 were agreed during the year, and nine were withdrawn. The average time taken to reach an agreement was 27.8 months. This figure is up from the 26 months in 2012-13, and 16.9 months in 2011-12. Alongside the release of the statistics, HMRC recommended that any enterprise interested in applying for an APA should contact it for an informal discussion, ahead of the presentation of any formal application.

198 Advance Thin Capitalization Agreements (ATCAs) were agreed in 2013-14, compared with the 144 agreed during the previous year. There are now 510 ATCAs in force. The average time taken to reach an agreement fell slightly, from 11.7 months in 2012-13 to 11.4 months in 2013-14.

HMRC resolved 46 Mutual Agreement Procedure cases in 2013-14. HMRC said that an increase in the average time taken to settle these disputes, up to 29 months from 21, was as a result of the successful settlement of five of the oldest and most difficult cases. If these are excluded, disputes were resolved within 21 months on average.