![]() HMRC have confirmed that they are still planning to undertake a public consultation on the SAT later in 2023. Summary Audit Trail: The final regulations also provide HMRC with the power to introduce the requirement for affected businesses to produce a Summary Audit Trail (SAT). HMRC’s guidance notes that “it is advisable to note the reason (and any supporting analysis) leading to the conclusion that specified transfer pricing records are not required in case of any subsequent HMRC information request." If after applying these exclusions the relevant UK taxpayer would not be required to include any information about controlled transactions in the Local File then it is not required under the regulations to prepare a Local File or Master File for that period (in practice other countries may still require a Master File). ![]() No exemption applies for APAs made after 31 March 2023 but information contained in the APA application or APA annual reports can be leveraged and Transactions which are the subject of advance pricing agreements (APAs) made with HMRC on or before 31 March 2023 do not need to be included in the Local File.Controlled transactions where both parties are resident in the UK do not need to be included in the Local File except where one or both of the parties have elected into Patent Box or are carrying on a ring fence trade.Financial transactions where an investor only meets the participation condition because it is attributed the rights and powers of other persons with whom it ‘acted together’ in relation to the financing arrangements do not need to be included in the Local File.Important exclusions: There are some important relieving measures, some of which are new or amended from the draft regulations previously published for consultation: However, for large businesses who are below the CbCR threshold, and have material related party cross border transactions, applying the new requirements on a voluntary basis is advised. This is reinforced by the new HMRC guidance which states “HMRC is of the view that an appropriate way to demonstrate that provisions between related parties adhere to the arm’s length principle is to prepare documentation in line with the OECD’s recommended approach even where the MNE group test is not met." For those groups who haven’t undertaken a recent review of functional analyses for material transactions impacting UK entities, or groups that do not have defined transfer pricing policies for their UK entities and regular monitoring of actual outcomes, early adoption may help flush out any issues requiring remediation ahead of the first year when a Local File is mandatory.īusinesses in scope: The regulations apply to multinational groups which meet the Country-by-Country Reporting (CbCR) threshold requirement of at least EUR 750 million revenues for the relevant period. ![]() The documentation required for each relevant period is a Master File and Local File which contain the information described in Annexes I and II to Chapter V of the 2022 OECD Transfer Pricing Guidelines (TPG). We are already seeing groups looking to adopt these provisions in advance of the statutory requirement. ![]() Timing: The new requirements have effect for corporation tax purposes for accounting periods beginning on or after 1 April 2023, and for Income Tax purposes for 2024-2025 and subsequent tax years. We have summarised below our view of the Top 10 things that large businesses with UK operations need to know about the new requirements: We expect to see tougher enforcement by HMRC of penalties for non-compliance under the new regulations. With this in mind, impacted groups should undertake detailed planning addressing what transactions will need documenting, how to gather accurate and timely intercompany transaction data, and what other information will be required for the documentation. The Transfer Pricing Records Regulations 2023 were published on 19 July 2023 and HMRC’s International Manual has also been updated with new guidance at INTM450000 onwards. This article lists the Top 10 things that large businesses with UK operations need to know about the new requirements. ![]() These new regulations mark a major change as, for the first time, the UK has prescriptive mandatory TP documentation requirements. Following the Spring Finance Bill 2023 receiving Royal Assent, the Government has published a statutory instrument implementing the new UK Transfer Pricing (TP) documentation requirements. ![]()
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