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HMRC internal manual

International Manual

HM Revenue & Customs
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Transfer Pricing: methodologies: Mutual Agreement Procedure: SP1/11: Administration

Statement of Practice 1/11: administration

Presentation of cases to invoke MAP in relation to transfer pricing adjustments, under both the UK’s tax treaties and the Arbitration Convention, are dealt with by CTIAA Business International.

The MAP provided for in most of the UK’s tax treaties and the Arbitration Convention empower the competent authorities of the two tax treaty partners to consult each other when an enterprise claims that it is being taxed otherwise than in accordance with the convention as a result of the actions of one or both of the relevant fiscal authorities. MAP is a process of consultation, not litigation, between the two competent authorities. The taxpayer is not a formal party to those consultations as such, but may be invited to participate informally at the discretion of the competent authorities. Where it considers such participation likely to be useful the UK will press for, but cannot guarantee it; the position of the competent authorities of the UK’s treaty partners in this respect is outside the UK’s control.

In the UK the Commissioners for Her Majesty’s HM Revenue & Customs (HMRC), or their authorised representatives, are the competent authority. For cases under MAP the Commissioners have authorised Judith Knott to represent them in respect of all transfer pricing matters.

An enterprise may initiate MAP by presenting a case that it is subject to taxation, otherwise than in accordance with the tax treaty or the principles of the Arbitration Convention, to the competent authority for the country of which it is a resident or, in some cases, a national. In a transfer pricing case, a case might be presented by the enterprise which has had, or will have, an adjustment made to the price of goods or services transferred to or from a related party in another country. The enterprise may request that the competent authority of the first country reduce or withdraw the adjustment and/or that the competent authority of the second country allow a corresponding adjustment to the income of the related party to prevent economic double taxation. The UK is ready to receive the presentation of a case whether it is the state which has made a transfer pricing adjustment or whether it is the state being asked to make a corresponding adjustment for a transfer pricing adjustment made by its treaty partner. Treaty partners, however, may have their own practice and/or regulations regarding which competent authority should receive presentation of a case and taxpayers need to ensure compliance with those requirements.

The Arbitration Convention requires that at the same time an enterprise presents a case to the competent authority of the State of which it is resident or in which it has a permanent establishment, it must at the same time notify the competent authority of any other States which may be concerned in the case. As a matter of good practice, the UK advises that a presentation of a case should also be copied to the competent authority of the other State in a MAP case even if it is outside the Arbitration Convention.

In the UK there is no set form of presentation. Specific treaties, however, may state that certain information must be provided before it is accepted that a case has been presented for the purposes of starting the period after which arbitration may be invoked. Other countries may also have more extensive domestic information requirements. It is therefore advisable to consult the relevant treaty and any public guidance on the matter provided by the UK’s treaty partner if presenting a case to that partner.

Otherwise, UK taxpayers may present their cases in writing to the person and the address set out at the conclusion of this Statement. A presentation should specify the year(s) concerned, the nature of the action giving rise, or expected to give rise, to taxation not in accordance with the convention, and the full names and addresses of the parties to which the MAP relates, including the UK enterprise’s tax office and reference number.