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HMRC internal manual

International Manual

Transfer Pricing: Operational guidance: real time working of transfer pricing issues: thin capitalisation

 

HMRC recognises that real time working of issues, including thin capitalisation, can provide earlier certainty for the business and allows HMRC to examine issues when information and relevant business personnel are more easily accessed.

CRMs and case teams are expected to engage with customers about a wide range of potential risks and can welcome information about the business and their transfer pricing (TP) policies to inform their annual risk review process. However, it is important to be clear that HMRC will only engage in discussion and provide comment on the TP treatment of debt transactions through the Advance Thin Capitalisation Agreement (ATCA) process or when those issues are under enquiry.

HMRC provides a statutory mechanism under s218 TIOPA 2010, separate from the transfer pricing APA programme, to facilitate real time working in relation to the transfer pricing of debt. The formal ATCA process is the only way that a customer can be given certainty about the future TP treatment of debt transactions. INTM512010 and Statement of Practice 01/12 provide a full explanation of what is expected from applicants.

If the customer does not wish to pursue an ATCA and the case team perceive a significant risk or concern with the funding arrangements, the case team should consider a real time enquiry. This enquiry will be subject to the normal TP governance.

Where a thin cap issue is neither suitable for an ATCA, nor does it warrant an enquiry, CRMs and case teams should not engage with the customer in discussions on the matter.

 

On no account should a low-risk opinion or any other indication as to the perceived level of risk in the arrangements be given outside the ATCA or TP governance frameworks.

 

Potential interest in applying for an ATCA may be referred to the following contact points, if there are likely to be issues of complexity or suitability. CRMs and case teams can also get in touch to discuss the likely suitability of an ATCA for their customer:

Miles Nelson (intra-group funding)

CTIS Business International
11th Floor East, Euston Tower, 286 Euston Road, London NW1 3UH
Telephone: 03000 585647
Fax: 03000 543795
e-mail: milesc.nelson@hmrc.gsi.gov.uk

Graeme Grozier (private equity funding)

CTIS Business International
11th Floor East, Euston Tower, 286 Euston Road, London NW1 3UH
Telephone: 03000 538090
Fax: 03000 543795
e-mail: graeme.grozier@hmrc.gsi.gov.uk