HMRC’s statistics report across a variety of areas, including TP 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 enquiries - Although the yield has fallen slightly to £1.5bn from the record highs of the prior 20/21 year, the yield is still relatively high compared to the last 6 years. This clearly demonstrates that transfer pricing remains a key area of focus for HMRC, which mirrors our experience of what we’re seeing with clients.
Diverted Profits Tax - a large portion of the transfer pricing yield still results from additional Corporation Tax due to DPT investigations which stands at roughly a third. This aligns with one of the main purposes of the DPT legislation to encourage behavioural change and ensure the correct amount of Corporation Tax is paid. It also demonstrates that although DPT is nearly 8 years old, it continues to be a significant tool in HMRC’s compliance suite.
Advance Pricing Agreements
20 APAs were agreed in 21/22, slightly down from 20/21 and the average amount of time taken to agree these increased to over 58 months. These figures may reflect the impact of the pandemic as well as the resolution of some applications that have been under discussion for some time. On a more positive note, new applications in 21/22 are up sharply (40 compared with 24 in the previous year), an indicator that taxpayers continue to see value in tax certainty. It may be hoped that an increase in resources in 2022, combined with the publication of the OECD's Bilateral APA Manual will help the UK competent authority to conclude more cases in a shorter amount of time.
