The statistics report across a variety of transfer pricing areas, including enquiries, Advance Pricing Agreements (APAs), Mutual Agreement Procedures (MAPs), Advance Thin Capitalisation Agreements (ATCAs), DPT investigations and Profit Diversion Compliance Facility cases (PDCFs) highlighting the additional yield, number of cases and length of time to resolve cases, across each area. A summary of the statistics and our view of these are set out below.
Transfer Pricing - yield the highest for the last 6 years, up nearly 50% to £2.2bn in the period from £1.5bn in 2019/20
With increasing levels of yield, transfer pricing clearly remains a key area of focus for HMRC, which mirrors our experience of what we’re seeing with clients. The increase in time to settle cases is a reflection of the growing complexity and amount of the information required by HMRC to resolve their enquiries, as well as the diversion of both clients and HMRC resources to tackle the impact of the pandemic.
Diverted Profits Tax - a large portion of the transfer pricing yield results from additional Corporation Tax due to DPT investigations which has significantly increased to £1.5bn from £664m in 19/20. This aligns with one of the main purposes of the DPT legislation to encourage behavioural change and ensure the correct amount of CT is paid.
Advance Pricing Agreements - 24 APAs were agreed in 2020/2021, slightly down from 2019/20 and the amount of time taken to agree these was 55 months. The very high figure may reflect the impact of the pandemic as well as the resolution of some applications that have been under discussion for some time.