Radical reforms to transfer pricing by HMRC

The taxman is to release statistics for the number of transfer pricing
enquiries it settles for the first time ever in April this year.

The move is part of radical reforms to the way HM Revenue & Customs
handles complex transfer pricing disputes. The changes will also see HMRC train
a team of transfer pricing specialists, as it attempts to achieve its target of
clearing up all transfer pricing enquiries within an 18 to 36-month window.

‘We are now launching a radical new technical specialism that reaches across
our operational, economic analysis and policy units, to deliver the approach.

‘These transfer pricing specialists are now being appointed and arrangements
are being made to provide additional training to enhance their specialist
skills,’ HMRC said in a statement.

The statistics the department plans to release from April 2008 will disclose
the average time taken to settle enquiries over the last quarter as well as the
‘average age’ of unresolved enquiries.

The changes are part of HMRC’s ongoing attempts to improve its relationship
with large business and follows months of consultation on how to deal with
transfer pricing issues.

Businesses and advisers have long campaigned for HMRC to speed up
settlements.

‘These changes will be helpful. Settling transfer pricing enquiries has
become over-complicated and a dragged out process. Publishing statistics will
give business some certainty over how long enquiries will take,’ says Deloitte
tax partner Bill Dodwell.

In its response to the transfer pricing consultation Grant Thornton said
there were inspectors with ‘insufficient knowledge’ of working practices in
certain industries and the structures of multinational businesses.

Dodwell says that as all the leading accounting firms rely on specialist
transfer pricing teams it is a welcome move from HMRC to match this expertise by
training specialists in its own ranks.

The changes announced by HMRC have been welcomed, but massive challenges
still lie ahead in the area of transfer pricing.

Business is still unsure whether transfer pricing enquiries should be dealt
with by HMRC’s large business service or its international division. There is
also much work to be done to improve co-ordination between tax authorities
around the world.

International revenue departments have discussed the development of a unified
approach to transfer pricing compliance, but multinationals have been calling
for more intensive collaboration to avoid different treatments in different
jurisdictions.