INTM422010 - Transfer pricing: methodologies: Advance Pricing Agreements: introduction

SP02/10 - Advance Pricing Agreements

GENERAL INTRODUCTION

HMRC has run an Advance Pricing Agreement (APA) Programme since 1999 to assist businesses in determining the most appropriate methodology to derive the arm’s length outcome for complex transfer pricing issues and prevent disputes arising that may otherwise result in a Mutual Agreement Procedure (MAP) being necessary later.

This statement of practice (SP) updates an earlier statement on APAs, SP02/10, published in 2010 (which was itself an update of SP3/99) and is intended as general guidance as to how HMRC interprets the APA legislation and operates the UK APA Programme. HMRC is taking the opportunity to incorporate best practice identified since SP02/10 was published.

The legislation that relates to APAs appears at Sections 218 -230 of the Taxation (International and Other Provisions) Act 2010 (TIOPA). This SP is intended to provide guidance about how HMRC interprets the APA legislation and applies it in practice.

Although the same legislation is used as the basis for Advance Thin Capitalisation Agreements (ATCA), HMRC has published a separate document, SP 01/12, to provide detailed guidance about its practice in reaching advance agreements over thin capitalisation issues which have their own distinctive features and are therefore generally negotiated under an entirely separate process.

INTERNATIONAL GUIDANCE

The Organisation for Economic Co-operation and Development (“OECD”) has developed the Bilateral Advance Pricing Arrangement Manual (“BAPAM’) which is intended as a guide for the bilateral APA process and can be found at https://www.oecd-ilibrary.org/taxation/bilateral-advance-pricing-arrangement-manual_4aa570e1-en;jsessionid=TsQt8qAJF70IOEq2QEnZ4Qy0NFPlCy1IpGqlr7zY.ip-10-240-5-180