The following Corporation Tax guidance note Produced by Tolley in association with Anne Fairpo provides comprehensive and up to date tax information covering:
UK connected parties are required to self-assess their transfer pricing position when filing their tax returns by using what is known as the ‘arm's length principle’. Transfer pricing rules in the UK require that transactions between connected parties should be recognised for tax purposes by applying the amount of profit that would have arisen if the same transaction had been carried out by unconnected third parties. Where lower taxable profits or greater allowable losses would result from an actual transaction as compared to a calculation based on a theoretical arm’s length relationship, each entity will be regarded as an ‘advantaged person’. These advantaged persons are required to identify the relevant transactions and make transfer pricing adjustments when submitting their tax returns to HMRC.
Please refer to the Transfer pricing rules ― overview guidance note for further background on the UK transfer pricing regime and the types of transactions which may be caught by these rules.
In common with the general way HMRC approaches their relationships with large businesses, a risk assessment will be carried out to identify the potential transfer pricing exposure. HMRC will only seek to query the self assessment return where it is considered that there may be a risk of underpaid tax or overstated losses. It is not uncommon for HMRC to make initial transfer pricing queries outside of the formal enquiry framework, expressing their intention to raise more detailed queries at a later date. Subsequently, HMRC will open a formal enquiry within 12 months following the end of the accounting period to which the tax return relates. In essence, this allows HMRC a little more time to formulate their more detailed questions.
Any enquiries into the transfer pricing position of a group are usually led by the customer relationship manager (CRM), if one is assigned to the group, as well as the transfer pricing specialist and International Issues Manager working for the CRM. The Transfer Pricing Group consists of dedicated transfer pricing special
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
The vast majority of companies will have loan relationships and so will need to consider how they are taxed under the loan relationship rules. There are also specific provisions dealing with relevant non-lending relationships and other deemed loan relationships. Companies are generally taxable on
IntroductionUK tax must be withheld on UK payments including:•interest•royalties•rental incomeUK withholding tax may be reduced under the provisions of a double tax treaty (DTT). Prior to 1 June 2021, payments of interest and royalties made to EU resident associated companies were also exempt from
VAT fuel scale chargesWhat are fuel scale charges?The VAT fuel scale charge is a simplified method that can be used by a business that funds both business and private mileage costs for employees to account for any output tax due on the private use of the vehicle. The charge was introduced to
The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.