Transfer Pricing Services in the United Kingdom
Get your compliance right and learn all about transfer pricing services in the UK with this quick read from 3E Accounting.
Tax compliance is top on the list of every company’s annual look-out. While taxation can be straightforward for most businesses, they do get a bit complicated when it comes to multinational companies (MNCs). The potential to ‘fudge the accounts’ is very real, and to ensure full compliance, transfer pricing rules apply. There are numerous transfer pricing rules, and these vary according to worldwide practice and jurisdiction. By engaging specialists who offer transfer pricing services in the UK, businesses can ensure that their business remains compliant.
Pricing It Right
The world of transfer pricing includes rules, regulations and guidelines that span both domestic and international arenas. Tax scrutiny is on the rise, and compliance is more crucial than ever.
In the UK, the Base Erosion and Profit Shifting Actions (BEPS) applies stringent focus on transfer pricing. In particular, BEPS Action 13 has standardised a general worldwide transfer pricing documentation framework. HMRC’s Profit Diversion Compliance Facility (PDCF) was launched in 2019 to ensure cross-border compliance with BEPS. Documented evidence must support all transfer pricing policies before filing a tax return.
In essence, transfer pricing is about rules on the internal pricing of intra-group activities in MNCs. There must be an alignment between taxable profits and value creation. Hence, the business activities’ pricing will determine the relevant jurisdictional taxes that are to be paid. Transfer pricing rules ensure that intra-group pricing is not manipulated to gain unfair tax advantages.
A core tenet of transfer pricing is that business activities should be above board and on commercially viable terms. Pricing and conduct of business within the MNC group must be done fairly without relying on the intra-group relationship status. This is referred to as the arm’s length principle. Hence, pricing policies and business activities should be done at an arm’s length, i.e., without relying on a relationship.
Specialists companies such as 3E Accounting offer multi-tiered services beginning with a full assessment on transfer pricing scrutiny and risk. Achieving clarity on risk assessment will enable appropriate prioritising of transfer pricing policies. This includes having a value chain management analysis done as well as identifying and articulating key value drivers. This is further facilitated by documented evidence of compliance, which will be crucial under audit, jurisdictional scrutiny, or dispute resolution.
Irregularities in transfer pricing can result in tax reassessments and ensuing penalties. Some instances can lead to arbitration or disputes with tax authorities which can be costly to the business. There is also a risk of double taxation being imposed. Annual BEPS compliance reviews should be undertaken to avoid falling afoul of the law. Alternately, MNCs can register for the PDCF or engage specialists to look into alternative approaches.
Whether your business is transitioning to higher annual turnovers or increasing the number of employees, 3E Accounting is ready to assist. Our transfer pricing services in the UK are geared towards ensuring full compliance with all rules and regulations. We offer customisable solutions to mitigate risk, enhance value and manage solutions. Contact 3E Accounting today to learn more from our transfer pricing specialists about how your company can ensure compliance.