The following points will help international businesses to keep their transfer pricing documentation up-to-date and in line with their economic profile. Getting this right will mean that a business’ corporation tax return can be signed off with confidence that controlled transactions are at arm’s length as required under UK tax legislation.
Check your UK transfer pricing local file
Is your transfer pricing documentation relevant to the next UK tax return you will be submitting (or even the last one submitted)? Ideally, the narrative in your UK transfer pricing local file should reflect the functions, assets and risks borne in respect of the particular tax return filing year.
Can you locate all your transfer pricing documentation to support open tax years? Does your UK transfer pricing local file accord with the group/division’s transfer pricing master file?
Do your inter-company service agreements reflect the service transactions provided/received in the year, or are they generic? If the latter, we advise a tax review is undertaken by a transfer pricing specialist.
Are all other controlled transactions supported by agreements? If not, we advise a review is undertaken.
Economic benchmarking data
When was the last time your economic benchmarking analysis was updated, to support the UK company’s controlled transactions? In many cases we review, we find the data is out-of-date or not relevant anymore.
The latest OECD guidance and the UK’s new legislation on transfer pricing documentation
Is your current transfer pricing support in line with the OECD’s Transfer Pricing Guidance published in January 2022?
Will your UK transfer pricing documentation be compliant with the new UK transfer pricing legislation on documentation, which is expected to apply for accounting periods commencing on or after 1 April 2023?
Is the UK company owed long-term debtor balances by associated enterprises, on which interest has not been charged?
Taking the pandemic into account
Have you considered the effects of Covid-19 on your supply chain and considered current adjustments to your transfer pricing policy. Does your transfer pricing documentation support this?
If you think your current approach may not cover all of these areas, please contact Dawn Ross to arrange a transfer pricing health check.