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HMRC internal manual

International Manual

Transfer pricing: methodologies: Advance Pricing Agreements: introduction

SP02/10 - Advance Pricing Agreements

GENERAL INTRODUCTION

HM Revenue and Customs (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 being necessary later.

The Statement of Practice (SP) on APAs, SP02/10, was published in 2010 (replacing SP3/99) and was updated in November 2016. It is intended as general guidance as to how HMRC interprets the APA legislation and operates the UK APA Programme. The text of SP 02/10 can be read in full on the HMRC website. We reproduce the bulk of SP02/10 and its annexes here and in the following pages up to INTM422140 with additional page references and contact details where appropriate.

The legislation that relates to APAs appears at Sections 218 -230 of the Taxation (International and Other Provisions) Act 2010 (TIOPA).

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.