The recent HM Treasury/HMRC announcement on changes to the income tax rules on transfer pricing provides an example of how the climate has changed towards perceived avoidance and more importantly how the government is prepared to combat it.
What is striking about the announcement is that the antidote to avoidance is potential double taxation (even for purely commercial arrangements) rather than merely cancelling out any benefit. It is a stark warning that those who enter into avoidance need to assume they may end up worse off than if they had done nothing.
It is unfortunate that this warning is delivered in the context of UK to UK transfer pricing rules which HMRC has (for understandable reasons) insisted on taxpayers applying. To describe compensating adjustments for partnership service companies as ‘using the...
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