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HMRC transfer pricing enquiries yield more than £1bn

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HMRC has made ‘significant progress’ in reducing the average time taken to settle a transfer pricing enquiry and the average age of open enquiries, according to figures released last week.

The average age of settled enquiries at March 2012 was 26.1 months, down from 38 months at March 2008. The average age of open enquiries was 20.8 months at March 2012 (32 months at March 2008).

The yield from transfer pricing enquiries in 2011/12 was £1,095m.

 

2007/8

2008/9

2009/10

2010/11

2011/12

Total

£519m

£1,595m

£1,039m

£436m

£1,095m

Large Business Service

£494m

£1,564m

£973m

£273m

£944m

Local Compliance

£25m

£31m

£66m

£163m

£151m

Source: HMRC transfer pricing statistics

HMRC said fluctuations were ‘principally due to the effects of a small number of very large cases’.

KPMG Transfer Pricing Partner Andrew Hickman said it was ‘difficult to judge if HMRC is getting better at targeting appropriate cases and working them more effectively’. But HMRC had been ‘successful in almost entirely eliminating very old cases and bringing the duration of the experience down to less than two years.’

Hickman observed that the contribution from Local Compliance had remained stable and showed that transfer pricing was ‘not just an issue for the largest multinationals’.

Advance pricing agreements (APAs)

Thirty-two APAs were agreed during 2011/12, HMRC said. Interest in the APA programme remained high: ‘There have been a large number of expressions of interest that have not progressed to formal applications yet.’

Hickman welcomed a reduction, by almost 6 months to 16.9 months, in the average time taken to reach an APA. ‘Such an improvement is highly commendable and helps to meet business demands for certainty within a reasonable time-frame,’ he said.

International Tax Review has noted that the number of jurisdictions offering an APA programme is increasing. Its global transfer pricing forum in Paris next month will examine ‘whether they are up to the task’.

Earlier this month the magazine quoted David Spencer, senior adviser to the Tax Justice Network, as saying that APAs should ‘reduce substantially’ the risk of tax avoidance and evasion. But Spencer argued that APAs were problematic because ‘they are negotiated agreements which normally are not available to the public and therefore contribute to the development of “secret law”’.

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