Tenfold increase in fines from transfer pricing enquiries in two years

In 2017-18 HMRC imposed fines totalling £413 437 on multinational businesses for transfer pricing irregularities according to figures obtained by LCN Legal specialists in inter-company agreements for transfer pricing compliance. This represents a tenfold jump over the past two years – fines worth £45 600 were imposed in 2015-16.

Although modest the dramatic ramping up in the value of penalties is evidence of a tougher approach by HMRC towards transfer pricing non-compliance.

The department aims to reach a negotiated settlement in transfer pricing disputes to avoid imposing penalties. Between 2012-13 and 2017-18 it secured £6.5bn in additional tax by challenging the transfer pricing arrangements of multinationals. The tax haul increased from £504m in 2012-13 to £1.6bn in 2017-18. Fines are imposed in a minority of cases.

Country-by-country reporting has increased the level of transparency of multinationals’ transfer pricing arrangements thereby making it easier for HMRC to challenge...