Market leading insight for tax experts
View online issue

Transfer pricing yield from mid-tier businesses hits record high

printer Mail

The transfer pricing compliance yield from mid-tier businesses collected by HMRC’s local compliance teams in 2012/13 stood at a record £253m, according to figures obtained by Pinsent Masons. The law firm said this was the first time HMRC has received more transfer pricing yield from its local compliance teams than from the large business service, and the amount collected in 2012/13 is more than ten times the tax authority’s yield in 2007/08 (£25m).

Heather Self, partner at Pinsent Masons, said: ‘These numbers should be a warning to mid-tier businesses that their transfer pricing arrangements are now firmly on HMRC’s radar. While it has taken a number of years, HMRC is now broadly satisfied that the largest businesses are conforming to transfer pricing regulations. Mid-cap businesses are next in line to be investigated, and should make compliance a priority immediately.’

However, an HMRC spokesman told Tax Journal: ‘It is not right to draw conclusions based on the values of agreed settlements in one particular year. Looking at the statistics as a whole, it is evident that these fluctuate from year to year, in part because of the effect of a small number of very large settlements. HMRC aims to identify and enquire into the highest transfer pricing risks across the large business population to ensure that it makes best use of its resources. In the last five years, HMRC brought in £4.6bn from transfer pricing enquiries, mainly from large business.’

Pinsent Masons also said that HMRC took an average of 26 months to pre-approve businesses’ transfer pricing arrangements during 2012/13, 54% longer than the 16.9 month average wait a year earlier. HMRC responded: ‘We always aim to close our enquiries as quickly as possible, but transfer pricing can be extremely complex. In 2013, we agreed 27 advance pricing agreements, 50% of which were settled within 15 months, providing certainty for business.’