Transfer pricing: operational guidance: governance: the selection stage
Business case and enquiry decision
As soon as a case team identifies a transfer pricing issue that may necessitate an enquiry, it should contact the Transfer Pricing Unit dealing with its office. A Transfer Pricing Specialist will then be assigned to the case.
With the assistance of the Transfer Pricing Specialist, the case team should then carry out more detailed risk assessment work on the issue to determine whether or not an enquiry is justified. At this stage it is advisable to consider whether relevant specialist input, e.g. Business, Assets & International Specialists, Knowledge, Analysis & Intelligence economists, Trade Sector Advisors, Corporate Finance Specialists and so on might be required.
If the conclusion of that exercise is that an enquiry is justified, then the case team with the help of the Transfer Pricing Specialist must prepare a Business Case for submission to the appropriate Transfer Pricing Panel.
If, on the other hand, the conclusion is that an enquiry is not justified, there is no requirement to prepare a Business Case. However, it is good practice to record the results of the research carried out and the conclusion reached to inform future risk assessment. It is therefore recommended that a pro forma Business Case be prepared and left on file.
Should the case team/Transfer Pricing Specialist conclude that, though justified, an enquiry should nevertheless not be opened, a full Business Case must still be prepared and submitted to the appropriate Transfer Pricing Panel stating the reasons for that conclusion.
A Business Case must be prepared using a standard template according to detailed guidance both of which are available on the Transfer Pricing Group Intranet site. The template is also used for recording later stage reviews and is a living document for control of the transfer pricing enquiry.
The Business Case is a narrative document which sets out the case background, the risk assessment work undertaken, the reasons for andagainst enquiry and any special features. Critically, it also includes the recommendation of the Customer Compliance Manager which may be for opening, not opening or deferring an enquiry.
Enquiry decision must be approved
A transfer pricing enquiry must not be opened (or any approach made to a customer that might be construed as the opening of a transfer pricing enquiry) without the approval of the Transfer Pricing Panel or Board.
Once the Business Case has been submitted to the appropriate Transfer Pricing Panel, its members decide whether or not an enquiry is to be opened.
In smaller cases, this decision may be taken by a single Panel member (usually after consultation with one or more Panel colleagues). However, if that Panel member later becomes involved in working the case, they can no longer have any oversight of the case at the Panel level. More significant cases are decided by the full Panel with the largest cases being referred to the Transfer Pricing Board (or, very exceptionally, to Excom) for decision there.
The Panel’s decision is recorded on the Business Case template and, especially where that decision goes against the Customer Compliance Manager’s recommendation, the reasons for it are fully stated there.