Transfer pricing: operational guidance: governance: the progress stage
Action plans and regular progress reviews
If approval to open a transfer pricing enquiry has been given, the case team can proceed to issue the formal CTSA enquiry notice. Similarly, if approval has been given in a real time working case, detailed discussion and review of the transfer pricing issue can commence.
It is important to recognise that both for enquiry into, or real time working of, a transfer pricing issue the 18-month (or 36-month) period within which HMRC endeavours to reach a conclusion commences when engagement starts with the customer on that issue. This timeframe is tight and can only be achieved by active management.
It is therefore mandatory for each transfer pricing enquiry to have an Action Plan. The exact nature of the plan will vary according to the circumstances of the case. Where the issues are straightforward, and fact-finding and analysis limited, a simple plan may suffice. By contrast, in a complex case where there are several different strands of enquiry moving at different paces with different people involved, a more detailed plan will be needed.
It is important to see the Action Plan as a living document. At the outset an Action Plan should set out the expected timelines for:-
- Detailed fact-finding, during which information and supporting documentation is obtained and interim analysis carried out
- The period of time within which findings will be reviewed, arguments developed and views exchanged with the business
- the date by which HMRC expects to be in a position to prepare a Resolution Review and the planned date of settlement of the transfer pricing enquiry (which should normally be no later than 18 months after opening the enquiry for simple cases or no later than 36 months in particularly complex and high risk cases).
As the case progresses timelines should be amended, where necessary, to take into account any further fact finding and the additional review of findings, development of arguments and the exchange of views this necessitates. The aim of the plan is to:
- maintain momentum in a case
- identify a definite date by which HMRC will take the decision not to seek any further information, but to proceed to form a view on the basis of the information it already has
- and then to move quickly to the Resolution Review.
After the Resolution Review has taken place the enquiry will then proceed through discussion and negotiation to settlement of the case or, where agreement is not possible, to litigation.
Action Plans should be drawn up in collaboration with the customer where possible. Dialogue between the parties should be maintained throughout the enquiry to keep it on track and to trouble-shoot problems. If it is not possible to agree an Action Plan with the customer, then the case team should develop one unilaterally and inform the customer of the timetable it proposes to follow making appropriate use of information powers where necessary to maintain progress.
To help ensure that a transfer pricing enquiry progresses in accordance with the Action Plan, a formal review must be undertaken by the case team in partnership with the Transfer Pricing Specialist at regular intervals but at a minimum of every six months.
The review is recorded on the same template used from the start of the enquiry and must be submitted to the appropriate Transfer Pricing Panel on or before the six-monthly anniversary of the start of the enquiry or of the last review.
The review should contain
- a summary of progress since the start of the enquiry (or the last review)
- details of any factors inhibiting progress and what has been/will be done to counteract them
- a brief resumé of what further work the team intends to carry out
- an assessment of whether the enquiry is likely to settle according to the original timetable set out in the Action Plan and, if not, what revision is required (including an explanation if it is felt the case has become complex and justifies a 36-month timescale)
- a re-evaluation of the tax at risk, and
- a statement regarding the potential for culpability (see INTM483110) .