HMRC believes some multi-national enterprises have cross border arrangements in place which are not consistent with the OECD’s transfer pricing guidelines, that result in the diversion of profits away from the UK such that profits are taxed at lower rates or not at all. These types of arrangements are targeted by transfer pricing rules, together with the diverted profits tax (DPT) legislation, effective from 1 April 2015.
HMRC disclosure facility
To tackle the perceived continued diversion of profits away from the UK through such arrangements and/or aggressive transfer pricing policies, HMRC has launched the profit diversion compliance facility. This disclosure facility aims to encourage companies to review both the design and implementation of their operational structures and transfer pricing policies, change their transfer pricing policies where appropriate and use the facility to put forward a detailed tax report covering information in connection with a number of tax sensitive aspects impacting their UK tax position, with proposals to pay any additional tax, interest or penalties resulting from any necessary adjustments. Once a company has registered under the facility, it has up to six months to prepare and submit its report and pay any tax due.
HMRC has published detailed guidance on the facility.