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:
- Record keeping for companies – paragraph 21 of Finance Act 1998.
- Record keeping for individuals and partnerships – section 12B of the Taxes Management Act 1970.
- Current law on information and inspection powers – Schedule 36 to Finance Act 2008.
- Current law on penalties for errors – Schedule 24 to Finance Act 2007.
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Local Knowledge – International Coverage
Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.
All information contained in this publication is up to date on 2022. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.