In July 2022, the UK government announced changes to its transfer pricing regulations, which will come into effect from 1 April 2023 (the new tax year). These changes only apply to Multinational Groups with consolidated annual revenues over €750 million.
While UK businesses are already required to keep and retain records proving their tax returns are complete and accurate (the UK had country-by-country minimum standard reporting), these measures bring legislative clarity and bring the UK in line with the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan, introducing a standardised transfer pricing format.
The new documents will be required for fiscal periods commencing on or after 1 April 2023, and documentation should be prepared in advance of filing their corporate tax return.
The main updates affect the rules on record keeping (see links below), where new powers are being built into the legislation. These new powers will specify exactly which transfer pricing records must be preserved, including Master File, Local File and Summary Audit Trail documents, as laid out in the OECD Transfer Pricing Guidelines, Chapter V, Annexes I and II.
The Summary Audit Trail is the main new requirement. This will be a questionnaire that details the actions taken preparing the Local File, and a working draft of this is expected in September 2022.
Other legislation being adjusted ensures that such documentation can be legally requested and lists both the means of request, and penalties for failure to do so. These changes include the provision that UK transfer pricing documents could be requested outside of an enquiry.
While not expected to have a huge impact, administratively or financially, UK companies will be required to become familiar with the new rules and formats for documentation.
If you have any queries or concerns on these adjustments, please get in touch with your Auxadi team.
UK laws being amended: