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UK: HMRC targets profit diversion, transfer pricing risk for MNEs

UK: HMRC targets profit diversion, transfer pricing

Transfer pricing is high on the lists of major tax risks for UK taxpayers.


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HM Revenue & Customs (HMRC), buoyed by recent success in more than doubling the take from transfer pricing and diverted profits tax investigations, in January 2019 launched a profit diversion compliance facility (PDCF). In doing so, HMRC put multinational enterprises (MNEs) on notice of findings of widespread non-compliance with base erosion and profit shifting (BEPS) in their cross-border arrangements.

A July 2019 report [PDF 561 KB] prepared by the KPMG member firm in the UK considers:

  • HMRC’s increased scrutiny on the pricing of transactions between group companies, including the launch of the PDCF
  • The evidence required to support transfer pricing methodology
  • The increased rigour by HMRC in enforcing the penalty regime
  • Other issues including the reduction of penalties for disclosure and the suspension of penalties

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