Transfer Pricing
Transfer Pricing
Transfer Pricing
Over the past 10 plus years, transfer pricing has been a hot topic for international businesses. With specific statutory requirements, it can be difficult for businesses to understand exactly what they need to do to ensure compliance. This is where our specialist team can support.
A wide range of stakeholders are now focused on transfer pricing, including tax authorities, auditors, senior management teams and audit committees, as well as this area being increasingly focused on during any due diligence on a potential sale and exit of the business.
This makes it imperative to have a robust transfer pricing operating model that is effective, implemented correctly and supported appropriately, both for multinational businesses with extensive global footprints and for those expanding overseas for the first time.
What is transfer pricing?
What is transfer pricing?
Fundamentally, in agreement with Organisation for Economic Co-operation and Development (OECD) member countries, UK transfer pricing legislation is designed to make sure that any related party transactions and intracompany dealings that a UK entity or permanent establishment is involved in follows the arm’s length principle.
There are specific statutory requirements in the UK relating to the preparation of transfer pricing documentation for groups generating over 750 million euros of turnover. However, groups below the 750m euros threshold must keep records which are sufficient to enable the taxpayer to deliver a correct, accurate and complete corporate tax return.
Crucially, taxpayers should evidence that their transfer pricing complies with the UK transfer pricing rules before signing the relevant tax return. In the event of an enquiry by tax authorities, the onus is on the taxpayer to be able to explain the steps taken before the filing of the tax return to satisfy themselves that they were compliant with the rules.
Who is affected by the UK transfer pricing legislation?
Who is affected by the UK transfer pricing legislation?
The UK transfer pricing legislation can affect UK companies and permanent establishments of all sizes. We work predominantly with groups who are either
1) UK headquartered with overseas operations,
2) overseas headquartered with UK operations and
3) private equity backed businesses (with respect to both the supportability of the financing structure post private equity investment and also on transfer pricing operating models where these groups have overseas operations).
Failure to comply with the principle can expose businesses to serious financial penalties. Having a robust transfer pricing strategy in place across your global footprint is essential for managing these risks.
How we support clients with transfer pricing requirements and compliance
How we support clients with transfer pricing requirements and compliance
Some of the areas where we typically support clients include:
- Operating model design and policy setting
- Review of the effectiveness of current operating models
- Operational transfer pricing (including effective implementation)
- Financial transaction – including detailed thin capitalisation, interest rate benchmarking, cash pooling, etc
- Tax disputes (including tax audits or enquiries, advanced pricing agreements (APA) and mutual agreement procedures (MAP))
- Transfer pricing support on business restructurings
- Global or local transfer pricing documentation including all aspects of economic analysis (benchmarking, review of internal comparable uncontrolled prices (CUPs) and profit split)
Our international reach (via our membership of the Allinial Global network of 236 firms across 140 countries) and local expertise allows us to provide pragmatic, holistic advice that aligns to your commercial objectives.
Comprehensive, personalised solutions
Tax planning is a phrase to fill some with organisational dread, but at Azets we plan with efficiency and shine a light on existing and changing ways to be as tax efficient as possible. Contact us to put a plan in place for the now and make it sustainable for the future.