Temporal limit of advance pricing agreement

The taxpayers provided services to a Swiss-based group entity which held intellectual property (IP) assets. The services enhanced the value of the IP which the entity used to make profits which were taxed at lower rates in Switzerland than in the UK.

HMRC charged the companies to diverted profits tax (DPT) for the accounting period 2018. The taxpayers sought a judicial review saying the charging notices were inconsistent with an advance pricing agreement (APA) agreed with HMRC in 2013 but which ended in 2014.

The Upper Tribunal dismissed the claim and the taxpayers appealed.

The Court of Appeal said there was ‘nothing in the language of the APA to support the notion that the agreed treatment should enjoy a potentially indefinite afterlife in future accounting periods once the term of the APA had come to an end’.

The court was satisfied that the 2018 accounting period...