![]() ![]() Transfer pricing documentation must be preserved until the latest of six years from the end of the accounting period, the date on which any enquiry into the return is completed, or the date on which HMRC is no longer able to open an enquiry.We have also found in our experience that this is expected by HMRC tax Inspectors. In reality since the publication of the BEPS Action 13 report and the updated OECD Guidelines, more and more groups have been using the OECD Local File and Master File templates to prepare their transfer pricing documentation – whether they cross the EUR 750 million threshold or not. ![]() Transfer pricing documentation should be proportionate to the nature, size and complexity of a group’s business and consist of information and records relating to a period covered by the tax return. Records and evidence are required to be kept in order to demonstrate to HMRC that the results of transactions with related businesses are determined with reference to the UK’s transfer pricing rules and the application of the arm’s length principle. Currently, unless a group is covered by the UK’s Small and Medium Enterprise exemption, then profits or losses should be calculated with reference to the arm’s length principle.Instead HMRC expects such groups to keep a record of any analysis undertaken to support that self-assessed position and provide that analysis upon request, within the same 30-day time scale as for documentation. Where a group self-assesses that all of its international related party transactions are immaterial (not yet defined), HMRC does not intend to require it to complete a Local File or make an annual declaration.The purpose of the Master File and Local File is to support the transfer pricing policies underlying the filed corporate tax return, and therefore should be prepared in advance of the annual filing. HMRC has confirmed the 30-day timescale for the provision of the Master File, Local File and SAT following request.HMRC is also introducing the Summary Audit Trail but there is limited detail as to what information will be required.This legislation has not yet been finalised. The definition of ‘large’ will align to the CbCR threshold: ie, multinational groups with annual consolidated revenue in the immediately preceding period of equal to or more than EUR 750 million are considered ‘large’. From April 2023, large businesses will be required to maintain a Master File and Local File, and a supporting Summary Audit Trail.The documentation should be prepared in advance of a company filing its UK corporation tax return and this point is to be reinforced by changes to the legislation on penalties in Schedule 24 to Finance Act 2007. ![]()
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