Transfer pricing: operational guidance: governance: case teams and the wider transfer pricing community
The role of Case Teams and the wider Transfer Pricing Community
The Transfer Pricing Community comprises all those people within HMRC - not just members of the Transfer Pricing Group (TPG) - who identify and carry out, or may need to carry out, transfer pricing work.
Not all transfer pricing work is undertaken by the TPG. It simply does not have sufficient resource to do that and, in any case, it would not be sensible to forgo the knowledge and expertise that Large Business Service (LBS) and Local Compliance (LC) case teams and others have built up in dealing with their businesses or sectors.
Transfer pricing risk assessment and enquiries are normally undertaken by LBS or LC case teams headed by their respective Customer Compliance Managers (CCM). The TPG provides those teams with skilled transfer pricing resource through the allocation of a Transfer Pricing Specialist to each enquiry or potential enquiry. The degree of involvement of Transfer Pricing Specialists varies but, in all cases, they are responsible for ensuring that the transfer pricing governance is adhered to.
That case teams must comply with the transfer pricing governance does not change or diminish the core role of the CCM. He/she is responsible for HMRC’s relationship with the customer and for the planning and direction of the work of the case team and that applies to transfer pricing matters just as to any other aspect of the work.
Where there is a difference is in the decision-making role. In keeping with its ultimate responsibility for transfer pricing matters and to provide consistency across transfer pricing cases, the TPG is charged with making decisions through the Transfer Pricing Board and Transfer Pricing Panels on the take-up and settlement of transfer pricing enquiries. These decisions are, however, taken in the light of recommendations made by the CCM and so he/she retains a degree of influence over the process.
There is more information on how the transfer pricing governance impacts on the identification and working of transfer pricing enquiries by case teams (and others) at INTM481010 onwards.
International Issues Managers
Although International Issues Managers (IIMs) have been less involved in the working of transfer pricing enquiries since the advent of the TPG, they nevertheless have a role to play. For the example, they are also involved, to varying degrees, in thin capitalisation work. IIMs can also make a significant contribution to a transfer pricing case at the risk assessment stage (and, indeed, during enquiry) by bringing to bear not only any direct transfer pricing experience they have but also expertise in other international areas, e.g. Controlled Foreign Companies (CFC), Double Taxation Relief, cross-border financial avoidance etc.
There are a number of other people within HMRC who can be expected to be part of the wider Transfer Pricing Community from time to time because of the considerable value they can add to the identification and working of transfer pricing enquiries. These include:
- LBS Trade Sector Advisors - who have a huge store of practical knowledge and experience of particular types of business
- LBS Strategic Risk Unit Corporate Finance Specialist - who has expertise in the valuation of corporations and their use of financial instruments
- Audit Service - whilst several of the Assistant Transfer Pricing Specialists have experience in this field, the TPG also has prioritised access to Audit Service personnel who can undertake systems and records review/analysis work
- Accountants - who should be involved wherever accountancy treatment is an issue
- Employer Compliance - who are not only a source of valuable information, but can also use their skills where cross-border employee secondment is involved
- Specialist PT Shares and Assets Valuation - whose valuers have a fund of knowledge of company and asset valuation, especially intangibles
Transfer pricing cases often throw up tax issues other than transfer pricing. In some instances, those other issues may present an alternative means of tackling the potential loss of tax to transfer pricing itself. For example, it may be better to employ CFC or residence arguments to ensure that the appropriate level of profits are brought into charge in the UK rather than to challenge the price at which an overseas company transacts with its UK affiliates. Other examples would include the application of CTA09/S441 which is the responsibility of the CSTD Business, Assets & International Transfer Pricing team for cross-border interest and the Anti-Avoidance Group for domestic interest, or Specialist PT International where chargeable gains may be an issue, e.g. in business restructuring cases.
In such cases, the relevant Business, Assets & International expert should be involved in the transfer pricing enquiry as soon as it becomes clear (ideally at the risk assessment stage) that these alternative approaches need to be evaluated.
The responsibility for ensuring the involvement of the appropriate non-TPG specialists in a transfer pricing case is shared by the CCM and the Transfer Pricing Specialist. Both need to be aware of the possibilities for widening the Transfer Pricing Community in any given case.
The key to effective pursuit of active or potential transfer pricing enquiries is for CCMs, their case teams and Transfer Pricing Specialists to work in partnership with one another and to extend that collaboration to include other specialists, both within and outside the TPG, along with the customer, as soon as the need to do so is identified.