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HMRC internal manual

International Manual

HM Revenue & Customs
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Transfer pricing: methodologies: Advance Pricing Agreements: reaching agreement

Reaching agreement

The agreement between HMRC and the business will be made subject to its terms being observed. The terms will include:

  1. A commitment from the business to demonstrate adherence to the agreed method for dealing with the transfer pricing issues during the term of the APA in the form of a regular compliance report (an “Annual Report”) as required by TIOPA10/S228 and
  2. The identification of Critical Assumptions bearing materially on the reliability of the method and which, if subject to change, may render the agreement invalid.

A sample “plain vanilla” agreement can be read at INTM422150. Normally the person responsible for signing the agreement on behalf of the business would be the person responsible for signing a tax return, subject to that person having authority within the multinational group to commit the group to the terms of the APA.

HMRC aims to complete the APA process within 18-21 months from the date of the formal submission. It may well be possible to complete unilateral APAs much more quickly than that. This objective is dependent on the complexity of the case and, in the case of bilateral or multilateral applications, may be dependent on the working practice of the Administration(s) in the other country or countries. It is also, of course, dependent on co-operation from the applicant. HMRC may view significant and repeated delay on the part of the business as indicative of a lack of co-operation and may then terminate the APA process as a result.

HMRC expects the business to facilitate an efficient process by providing timeously all the information necessary to consider the application properly and reach agreement. This extends to the enterprise’s co-operation in ensuring that the formal APA agreement and any associated procedural paperwork are finalised shortly after the finalisation of the transfer pricing method and/or, in a bilateral or multilateral process, the concluding of agreements with treaty partner(s).

If agreement on the terms of an APA cannot be reached with the business, HMRC will issue a formal statement recording the reasons. HMRC does not consider it has any obligation to continue discussion beyond the point at which it has determined that agreement cannot be reached.

A business may withdraw an APA request at any time before final agreement is reached.