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HMRC internal manual

International Manual

Transfer pricing: risk assessment: issues to consider before starting a transfer pricing enquiry: resources

Consider resources and costs

A thorough transfer pricing enquiry involving the pricing of goods, services or intangibles is likely to be resource intensive and costly both for HMRC and for the business. It will involve detailed research into the company’s business and the industry or sector in which it operates. It will also entail detailed examination of documents such as transfer pricing reports, legal agreements and other business records, which may be complex and extensive. There will be meetings - perhaps several - with the company and its advisers. It will be useful, and at times essential, to involve specialists and other HMRC colleagues. It is important to recognise the potential scale of resource commitment; resource need should be assessed at an early stage and kept under review throughout the enquiry. In the most complex cases, the team may become quite large and a formal project management approach may be appropriate.

Specialist resource is limited so input is likely to be on a consultancy basis with the bulk of the responsibility and work falling on the case team although, where the case warrants it, specialists may take the lead on a particular aspect. The approach should be to work the case in partnership under the overall direction of the Customer Compliance Manager.

Involve the business

Case teams should seek to work with the business to manage the impact of a transfer pricing enquiry and the resources which may be required. An early meeting with the business and its advisers can help case teams to better understand how the business operates and where risks may or may not arise. It is also good practice to involve the businesses in the action planning process. See INTM482130 for guidance on the detailed risk assessment process.

Not all businesses will want to have a meeting with HMRC. Whatever the reason for declining a meeting request, such a decision should not be held against the customer. In particular, case teams should not automatically form the view that a refusal to meet HMRC increases the business’s risk profile.

Central role of Transfer Pricing Specialists

Transfer pricing governance (see INTM481000 onwards) requires that a Transfer Pricing Specialist must be involved in every case. The TPS should take a very active role in risk assessment.

Thin capitalisation cases

Risk assessment of thin capitalisation issues is covered separately at INTM513010 onwards, but these comments apply equally to such cases.