© 2013 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP

International Experience in Transfer Pricing Regulations; Recent Developments in UKMichael McCormackDirector of TaxEdwards Wildman Palmer (UK) LLP

June 2013

Recent Developments in UK Transfer Pricing

♦ Background

♦ UK uncut

♦ Public Accounts Committee

♦ “devious, calculated…unethical”

♦ Backlash

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Introduction to UK Transfer Pricing Rules

♦ 1915♦ 1998/2004♦ Domestic/Firms♦ Thin capitalisation♦ Financing transactions♦ Advance pricing agreements♦ Advance thin pricing agreements♦ Balancing payments♦ Compensating adjustment♦ Dormant companies♦ Small and medium sized enterprises

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Operation of TP

♦ Prescribed/Detailed

♦ Arm’s Length

♦ TP Document

♦ Cost-plus

♦ Safe-harbour

♦ Profit Spilt

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Operation of TP System in the UK

♦ Self-certify

♦ Transfer pricing compliant

♦ Enquiry

♦ Transfer pricing group (TPG)

♦ Clarity

♦ Consistency

♦ Business/Risk

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Business Risk Analysis

♦ Industry♦ Pharmaceuticals♦ Online publishing/media♦ Telecoms

♦ Service Centre/service cost recharges♦ Intellectual property♦ Documentation♦ Functional analysis♦ Accurate comparables♦ Research and development♦ Intra-group financing

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Tax Framework

♦ UK most competitive tax system in G20

♦ Tax rate

♦ Dividend exemption

♦ Substantial shareholding exemption

♦ Controlled foreign companies

♦ Branch exemption

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