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HMRC internal manual

International Manual

Transfer pricing: methodologies: Advance Pricing Agreements: reaching agreement


  1. The agreement between HMRC and the business will be made subject to its terms being observed. The terms will include:
    • 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 Section 228 TIOPA 2010 and
    • the identification of Critical Assumptions bearing materially on the reliability of the method and which, if subject to change, may render the agreement invalid. This will generally include an assumption that the relevant transfer pricing law and OECD Guidelines remain materially the same.
  2. A sample “plain vanilla” agreement is included as an annex to this Statement SP02/10-Advance Pricing Agreements Annex 2. 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.
  3. HMRC aims to complete the APA process within 18-21 months from the date of the formal submission.  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 delay on the part of the business as indicative of a lack of co-operation or a loss of interest in agreeing an APA and may then terminate the APA process as a result.
  4. 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).
  5. The Tax Administrations cannot give effect to, and the enterprise cannot rely upon, the MAP APA reached between the Competent Authorities on its case unless, and until,  the necessary domestic paperwork has been completed. In the UK a written agreement between the Commissioners (or their representatives) and the UK person(s) covered is required by the APA legislation. 
  6. 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.
  7. A business may withdraw an APA request at any time before final agreement is reached.
  8. HMRC, and generally its treaty partners, will expect the actual pricing of the transactions covered by an APA to be consistent with the TP methodology and terms defined within it. Adjustments arising within the tax computation are expected to also be made in the accounts, thereby ensuring the economic and tax position of the arm’s length price is aligned.