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Article:

Multinational companies pay £5bn additional corporation tax

04 February 2020

The recent headline makes impressive reading. HMRC has published statistics for transfer pricing and Diverted Profits Tax ‘yield’ (additional tax raised) annually for a number of years, but this year has an emphasis on the results of HMRC’s focus on tackling perceived profit diversion by multinationals and changing behaviours.

In its announcement HMRC is keen to point out that skilled risk assessments and engagement management by its Customer Compliance Managers, supported by technical and policy experts has brought about a spontaneous shift in behaviour by a number of multinational companies in relation to their transfer pricing, resulting in a significant amount of additional corporation tax being paid.

Additionally, in early 2019, HMRC introduced the Profit Diversion Compliance Facility (‘PDCF’) offering companies a managed process by which it can self-review its affairs and propose via a Report to HMRC any additional tax liability it finds is due through a reassessment of its transfer pricing arrangements, and related tax matters.

We have seen HMRC actively investigate transfer pricing arrangements outside of a profit diversion context and have also seen additional resources being recruited from the profession to boost its capabilities. It has reported that there are 441 full time equivalent staff deployed on addressing international tax issues involving multinational companies and it estimates that the 100 ongoing investigations at April 2019 could generate an additional £2.9bn of yield.

This announcement re-emphasises that transfer pricing and profit diversion enquiries are front and centre for HMRC’s policy makers and specialist teams.

At BDO, we bring together the expertise of both our transfer pricing and tax dispute resolution specialists to support clients through the complexities of dealing with HMRC transfer pricing investigations and consideration of the PDCF process.

We would also like to announce that we are proud to be gold sponsors of this year’s TP Minds International.This event will bring you insights from the OECD, HMRC, and other international tax authorities on key issues. As sponsors we are delighted to offer you a 50% discount on the registration fee. Click here for more information.