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HMRC internal manual

International Manual

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Transfer pricing: methodologies: Advance Pricing Agreements: introduction

SP2/10: General introduction to APAs

HMRC has run an APA programme since 1999 to assist businesses in identifying solutions for complex transfer pricing issues.

HMRC issued Statement of Practice (“SP”) 02/10 in December 2010 to update an earlier Statement of Practice (SP3/99) on Advance Pricing Agreements (“APAs”). The SP is intended as general guidance as to how HMRC interprets the APA legislation and how HMRC operates the UK APA Programme. HMRC took the opportunity to incorporate best practice identified since SP3/99 was published, but the publication of SP02/10 did not mark a material change in HMRC’s approach to APAs.

The text of SP 02/10 can be read in full on the HMRC website. We reproduce the bulk of the text of SP02/10 and its annexes here and in the following pages up to INTM422150, with additional page references and contact details where appropriate. SP02/10 is intended as general guidance as to how HMRC interprets the APA legislation and how HMRC operates the UK APA Programme.

The legislation that relates to APAs, formerly found at Section 85, Finance Act 1999, now appears at Sections 218-230 of the Taxation (International and Other Provisions) Act 2010 (“TIOPA 2010”).

Although the same legislation is used as the basis for Advance Thin Capitalisation Agreements (“ATCAs”) HMRC has published a separate document, SP 01/12, to provide detailed guidance about its practice in reaching advance agreements over thin capitalisation issues. These cases have their own distinctive features and are therefore negotiated under an entirely separate process. SP02/10 and this guidance on APAs consequently has no impact on the guidance on ATCAs in SP01/12.