Income and Corporation Tax: update to definition of transfer pricing guidelines
Published 6 March 2018
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Who is likely to be affected
Businesses who are subject to the transfer pricing rules for purposes of Income Tax or Corporation Tax.
General description of the measure
The measure will update the definition of “transfer pricing guidelines” to incorporate the updated version of the Organisation for Economic Co-operation and Development (OECD)’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the ‘OECD Guidelines’) published by the OECD in July 2017.
Policy objective
This measure amends the references within the relevant legislation to incorporate the most recent revisions to the OECD Guidelines, which are the internationally agreed standard for application of the arm’s length principle for transfer pricing purposes.
This should provide certainty for business and minimise the potential for double taxation.
Background to the measure
The OECD published an updated version of the OECD Guidelines on 10 July 2017. The version mainly reflects a consolidation of the changes resulting from the joint OECD/G20 Base Erosion and Profit-Shifting (BEPS) project.
Detailed proposal
Operative date
The measure will have effect for section 164(4) Taxes (International and Other Provisions) Act 2010 for corporation tax purposes in relation to accounting periods beginning on or after 1 April 2018 and for Income Tax purposes in relation to the tax year 2018 to 2019 and subsequent tax years.
Current law
Current law is at section 164(4) Taxes (International and Other Provisions) Act 2010.
Proposed revisions
The Treasury, in exercise of the powers conferred by section 164(4)(b) of the Taxation (International and Other Provisions) Act 2010, make the Order to amend the definition of “transfer pricing guidelines” within s164(4)(a) to refer to the updated version of the OECD Guidelines published on 10 July 2017.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
There’s no impact on individuals or households as this measure only affects businesses.
There’s no impact on family formation, stability or breakdown.
Equalities impacts
The measure is not expected to have any equalities impact.
Impact on business including civil society organisations
Updating the definition of transfer pricing guidelines will provide certainty for businesses and minimise the potential for double taxation. This measure is expected to have a negligible impact on businesses admin burdens. One off costs include familiarisation with the new guidelines.
There aren’t expected to be any additional on-going costs. This measure is expected to have no impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
There’s no operational cost in terms of IT or resource for this change for HMRC but it may result in swifter resolutions to disputes.
Other impacts
A failure to update the legislative reference would potentially have significant reputational impact and cast doubt upon the UK’s commitment to the joint OECD/G20 BEPS project of which it has to date been one of the leading participants.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you’ve any questions about this change, please contact Jon Clark on Telephone: 03000 585708 or email: jon.a.clark@hmrc.gsi.gov.uk.
Declaration
Mel Stride MP, Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.