Dixons contravenes transfer pricing rules

DSG International (Dixons) has been told it was in breach of transfer pricing
guidelines, however, a settlement is yet to be agreed upon between the retailer
and HM Revenue and Customs.

Observers believe DSG could end up owing the taxman hundreds of millions of
pounds.

In a 62 page document, special tax commissioners John Avery Jones and Charles
Hellier outlined the decision, which has centred on the insurance of extended
warranties and whether business facilities provided were set according to a
standard market rate.

Transfer pricing relates to the value placed on assets or goods moved
internally from one subsidiary to another within a multinational, and most often
across international borders.

HMRC pursues cases where it believes the price has been set artificially low
for tax purposes.

According to Steve Hasson, transfer pricing partner at
PricewaterhouseCoopers, the DSG decision has done little to resolve concerns
around the treatment of transfer pricing disputes.

‘While it’s interesting and illustrates once again the hazards of tax
litigation, it doesn’t give us a great deal of insight into how the courts
perceive transfer pricing,’ he said.

The case was heard before the Special Commissioners in London between 24
November and 12 December last year, but the decision is understood to have been
deferred for the two parties to reach a settlement figure through arbitration.

In the decision, the Special Commissioners agreed that DSG set prices on its
assets that ‘confers a potential advantage in relation to United Kingdom
taxation’.

Jonathan Peacock QC and Francis Fitzpatrick, counsel, instructed by Reynolds
Porter Chamberlain, acted for DSG International and David Goy QC, Michael Green
QC and Rupert Allen, counsel, were instructed by the General Counsel and
solicitor for HMRC.

Further Reading:

Accountancy
Age TV: Transfer pricing clampdown

Arbitration
not litigation will solve transfer pricing wrangles

Number
of transfer pricing enquiries to rise


Related reading

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