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Spotlight on transfer pricing

Transfer pricing can be a significant issue for multinational groups, as Milsted Langdon partner Elaine Durrant explains.

Most countries now have detailed rules in place to deal with the tax impact of transactions between connected parties to prevent, for example, profits being moved from a high tax country to a low tax country.

In the UK and other mature tax jurisdictions, legislation requires cross-border trading and financial transactions between affiliated businesses to be conducted according
to the arm’s length standard, in the same way as if the transactions were between completely independent parties.

However, despite the impact that a poorly understood or badly thought-out transfer pricing policy can have on carefully arranged international corporate structures, in many cases transfer pricing is an afterthought.

The international tax team at Milsted Langdon specialises in preparing transfer pricing reports and giving transfer pricing advice. This is an area in which we have experienced considerable demand and is an offering that many businesses traditionally have had to engage “big 4” and “top 20” advisors to implement.

We have also been able to offer this service to not only our existing clients but also to other accountants and advisors who are not able to offer this service in-house, but want to maintain their existing client relationship.

Our key services include:

• preparing and reviewing transfer pricing memorandums
• assessing corporate obligations under different transfer pricing regimes
• advising on transfer pricing compliance for multiple jurisdictions
• managing transfer pricing enquiries
• advance pricing agreements.

One area that both clients and other accountants have really valued is our ability to carry out initial reviews of a group’s corporate structure to identify risks and opportunities. These reviews can often be a very cost-effective way of identifying whether transfer pricing, among other matters, is something that the group needs to address.

When we have carried out reviews in the past, they have regularly identified a number of weaknesses that has enabled the group to rectify them before any challenge is mounted by the tax authorities. This kind of proactive tax advice is something that delivers real value to the client. Perhaps more important to some clients is that an acceptable and well-documented transfer pricing policy can protect that client from substantial penalties of up to 100 per cent of the tax.

If you would like to find out more about Milsted Langdon’s international tax offering, then please contact either Elaine Durrant or Gareth Lewis on 01935 383500.