transfer pricing

HMRC recovered £1.1bn tax from transfer pricing enquiries during 2013/14, double the amount collected the previous year, according to official statistics.

Financial secretary to the Treasury David Gauke claimed the increase was due to the additional funding given to the Revenue “to challenge multinational groups to ensure the rules are followed and the right tax paid”.

The specialist HMRC unit that examines pricing within multinationals has secured a total of £5.8bn in tax since being launched in 2008.

Luxembourg’s approval of Amazon’s transfer pricing arrangements probably amounted to illegal state aid, according to the European Commission in a document addressing the grand duchy.

The 23-page paper asks Luxembourg tax officials to provide more information on the background to their agreements with the retail giant, and warns that all “unlawful aid may be recovered from the recipient”.

The European Commission (EC) has opened investigations into whether decisions about corporation tax to be paid by Apple, Starbucks and Fiat complied with European Union (EU) rules on state aid.

The commission has been examining tax practices in several member states, following media reports alleging that some big businesses received significant reductions by way of rulings issued by national tax authorities. Decisions can involve state aid if they provide selective advantages to a specific company or group of companies.

HMRC have published an amended technical note on compensating adjustment rules, following a recent consultation.

The transfer pricing rules are designed to mainly avoid double taxation between individuals and connected companies on international transactions, but they also apply to transactions within the UK. An increase in the taxable profits of one party gives rise to a right of the counterparty to claim a corresponding tax reduction known as the compensating adjustment.