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HMRC internal manual

International Manual

HM Revenue & Customs
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Transfer pricing: operational guidance: working a transfer pricing case: reaching a settlement

Arriving at a settlement

The settlement of a transfer pricing case needs approval from the Transfer Pricing Panel or Transfer Pricing Board, following a resolution report.

The Transfer Pricing Panel or Transfer Pricing Board will critically examine the recommendations made in the resolution report. Where they do not approve the report, the Panel or Board will explain why and set out the basis on which the case team should approach the negotiation.

There is rarely a single ‘right’ answer as to what is the arm’s length price. There may be different ways of arriving at a reasonable assessment of how the transactions would have been priced had they been carried out between independents. There will often be range of possible figures (narrowed as far as possible before a resolution report is made). The case team’s recommendations should usually identify parameters for the arm’s length price rather than a single target figure.

The case team should always negotiate within the parameters set by the Board or Panel.

Negotiation should always be informed by all of the facts and circumstances of the case. The outcome must be defensible on the basis that it not only results in the arm’s length profit being taxed but in the right year:

This is important because:

  • A CTSA return will normally include the arm’s length profit for that year, not the average of a number of years
  • Under the mutual agreement procedure, competent authorities reach settlement to give an arm’s length solution on a year by year basis.
  • adjustments to the return and self assessment may result in interest being charged and the amount of interest will depend on the years in which the adjustments are made

When the settlement is authorised, HMRC will write to the business and any adviser to confirm the agreement and its terms (see INTM483090).

If settlement cannot be reached on the basis of the panel, or where appropriate Board, view of the case then it must be referred back to the Transfer Pricing Panel or Board with

  • a Progressing The Case report (if exceptionally during discussion of the settlement with the customer further facts have emerged that need to be explored)


  • with appropriate further Resolving The Case recommendations.

Any settlement will be considered in the context of HMRC’s Litigation and Settlement Strategy (LSS);see for the text of the LSS and a commentary on it.