Crackdown: New rules aim to stop the misuse of artificial prices charged between related firms, often linked to tax havens

Crackdown: New rules aim to stop the misuse of artificial prices charged between related firms, often linked to tax havens

Ministers are planning legislation to help tighten the net on multinational companies that shift profits out of Britain to low-tax jurisdictions.

Businesses will have to keep a paper trail of their ‘transfer pricing’ decisions – how they allocate their costs and profit between different nations. 

The new rules are designed to prevent the misuse of artificial prices charged between related companies, often linked to tax havens.

The practice is often used by large corporations and tech firms, for example paying ‘marketing fees’ to use the company name which is registered offshore.

HM Revenue & Customs said that in the five years to 2020, it brought in ‘over £6 billion in additional tax from transfer pricing compliance activities, demonstrating that transfer pricing continues to be a significant area of risk for HMRC’.

Companies will be required to keep a ‘master file’ explaining how they arrived at their transfer pricing decisions across the world.

Source: | This article originally belongs to thehealthsite.com

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