Number of transfer pricing enquiries to rise

The taxman is set to increase the number of transfer pricing investigations, according to a senior figure at HM Revenue & Customs.

The news comes amid expectation that a long-anticipated judgment in the Dixons (DSG International) transfer pricing case is to be published. Experts believe DSG could have to find hundreds of millions in unpaid tax.

Lee Corrick, assistant director of corporate tax and VAT at HMRC, said between 75 and 100 new transfer pricing enquiries have been issued within the past financial year.

He said he expects that figure to increase in the next 12 months. ‘We wouldn’t expect it to be less,’ he added.

Corrick confirmed HMRC has only litigated the Dixons case on price - or the value placed on goods traded between subsidiaries. He confirmed the case has been adjourned on the issue of a settlement which is being negotiated between the two parties.

He said the taxman expects the vast majority of transfer pricing cases to be settled without the need to litigate, adding that the large financial sums involved in transfer pricing disputes acts as a deterrent to taking cases that far.

AstraZeneca is known to have provisioned £890m to transfer pricing claims.
‘At the end of the day, neither side wants to litigate unless they have to,’ Corrick said. He was not able to quantify the amount of tax involved in the
75-100 enquiries.

Steve Hasson, transfer pricing partner at PwC, said: ‘It’s not a surprise the numbers are increasing. You’d expect them to focus on the large cases which would be anywhere between £10m and £100m and, in some cases, much larger,’ he said.

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