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HMRC internal manual

International Manual

Transfer Pricing: methodologies: Mutual Agreement Procedure: The MAP process continued

Protective MAP Requests

As the UK Competent Authority will admit a case into MAP prior to first notification, it may be that at the time the case is presented it is not certain that a transfer pricing adjustment will be made or that double taxation will arise. In particular, it may not be possible to gauge the quantum of profits that might be subject to double taxation. In such cases, the UK Competent Authority may well defer MAP discussions with the Competent Authority of the treaty partner until it becomes clear that such discussions are likely to prove meaningful and effective in avoiding double taxation.


A protective MAP request protects the taxpayer against missing time limits.  It does not mean that the UK Competent Authority automatically accepts that the MAP request is justified.  As it is likely that the taxpayer will not be able to provide full information and documentation at the point of making the protective request, the minimum information required in a presentation for a protective MAP request are details of the year(s) concerned; a brief description of the action giving rise, or expected to give rise, to taxation not in accordance with the relevant tax treaty; and the full names and addresses of the parties to which the MAP relates, including the UK taxpayer’s HMRC office and reference number.  The UK Competent Authority will defer consideration of whether or not the MAP request is justified until after all the required information and documentation (see INTM 423130) has been provided by the taxpayer. A protective MAP request does not constitute a trigger point for determining the start date of the subsequent MAP case. Nevertheless, in cases of doubt, the UK Competent Authority will contact the other state or states involved to explain why it does not consider it appropriate to commence MAP discussions at that point and to seek the agreement of the other state as to the point at which discussions should commence, provided the request is deemed to be justified. However, it should be noted that even if the UK Competent Authority is prepared to commence MAP discussions, the other Competent Authority may not be and the UK Competent Authority has no power to compel engagement.


MAP and the Enquiry Process

It is important to note that even though the Competent Authorities may begin discussions before an enquiry is completed, MAP is not an alternative to the normal enquiry process. MAP will seek to determine in principle how the double taxation of income/profits will be relieved by the tax treaty partners once the quantum of income/profits has been established. The Competent Authorities will not, however, conduct an enquiry as part of the MAP and MAP will not suspend or replace an enquiry. Equally, presenting a case for MAP should not, of itself, give rise to the opening of an enquiry and it will not replace the statutory framework surrounding the opening of such enquiries. It may, however, be necessary for the UK Competent Authority to seek information from the taxpayer in order to determine whether an adjustment made by a tax authority conforms to the arm’s length principle. Normally such information will exist as a result of the enquiry and/or be reflected in the case presented for MAP, but clarification of fact and /or economic analysis may be required as MAP negotiations develop.


MAP and Domestic Litigation

Where a case has been settled under the UK’s judicial process before it is presented for MAP, the UK Competent Authority would expect, on request, to take the matter up under MAP. The UK considers that both a court and a tribunal form part of the judicial process.


MAP does not, however, provide a parallel avenue to the domestic appeals process, though early entry into MAP may be useful in helping a taxpayer determine whether the appeals process needs to operate. The UK follows the approach adopted by most countries as described in the Commentary on Article 25 at Paragraph 76. Under this approach a person cannot simultaneously pursue the MAP and domestic legal remedies. However a case may be presented and accepted for MAP while the domestic remedies are still available. In such cases, the UK Competent Authority will generally require that the taxpayer agrees to the suspension of these remedies or, if the taxpayer does not agree, will delay the MAP until these remedies are exhausted. Where the adjustment giving rise to MAP has been made in the other state, the UK Competent Authority does recognise that whilst a taxpayer may be willing to suspend domestic legal remedies, the other fiscal authority may be unwilling to do so. Similarly, the UK Competent Authority recognises that pursuit of domestic legal remedies in another state may take a considerable amount of time. In such cases the UK Competent Authority may be willing to continue the MAP while the domestic legal process continues, but of course cannot guarantee that the other Competent Authority will be willing to do so.


Where the MAP is first pursued and a mutual agreement has been reached, the taxpayer and other persons directly affected are offered the possibility to reject the agreement and pursue the domestic remedies that had been suspended. In such a case, the UK would consider that the efforts of the Competent Authorities to resolve the case by MAP have been exhausted


Taxpayer Involvement in the Process

MAP is a process of consultation at a government to government level, not litigation, which is conducted between the two Competent Authorities of the countries involved. The taxpayer is not a formal party to the process. However, the taxpayer may be invited to provide input at the discretion of the Competent Authorities. Where the Competent Authorities consider such participation likely to be useful they may invite the taxpayer to present additional information and clarification to assist the Competent Authorities to develop a common understanding of the facts of the particular case.