Raymond Doherty 5 Jun 2017 01:32pm

HMRC reviewing £3.8bn in transfer pricing

The Revenue launched 362 reviews into business transfer pricing in 2015/16

The amount potentially under dispute in relation to the UK's 2,000 largest businesses reached £3.8bn in 2016, up 60% on the previous year, according to research from law firm Pinsent Masons.

Transfer pricing concerns the charges made between the different parts of an international business for goods, services, or intangible assets. In recent years, multinational companies including Amazon, Starbucks and Google have been accused of deliberately transferring profits from the UK to lower tax jurisdictions to reduce their UK tax liability.

Heather Self, partner at Pinsent Masons, said that transfer pricing remains an “area of intense focus” for HMRC.

“They have been investing in specialists on the issue and businesses need to ensure that compliance procedures surrounding the process are robust.

“The value of tax HMRC believes it could be owed has risen substantially, and we are likely to see increased activity in this space going forward,” added Self.

The total number of reviews by HMRC fell by 10% in 2016, which, said Pinsent Masons, suggested the Revenue is focusing on higher-value, large-scale cases. 

This could also be a result of the Diverted Profits Tax, introduced in 2015 by then chancellor George Osborne as a way to tackle tax avoidance.