Transfer Pricing Documentation: Companies Prepare for More Stringent, Standardised Record KeepingUK Tax Strategy will Require Companies to Adopt more Tech-Enabled Transfer Pricing Documentation

Many large companies manually manage their transfer pricing data, documentation, and compliance – but recent developments demonstrate the significant risk of staying on that path.

In March, HM Treasury and HM Revenue & Customs published an in-depth set of consultations, updates, announcements, and requests for comment on a wide range of tax issues. The paper, titled Tax Policies and Consultations–Spring 2021, takes a big step in advancing the UK government's tax administration strategy for the next decade. One of the new consultations addresses transfer pricing documentation — exploring potential changes to record-keeping requirements for large companies and a new tax filing requirement for all businesses affected by transfer pricing regulations.

HM Revenue and Customs generally do not mandate specific records that UK businesses must prepare or their transfer pricing documentation format – but that could change. If it does, the impact on companies' record-keeping and tax reporting processes and practices will be significant.

Details from the UK Transfer Pricing Consultation

• UK businesses would be required to extract operational information from their records and present it to HMRC promptly and consistently.
• Within the country-by-country (CBC) reporting regime, HMRC would require MNEs to provide copies of their master and local files on request and within 30 days.
• Also under consideration: Requiring businesses to maintain an evidence log similar to the one prescribed in the Profit Diversion Compliance Facility Process.

The government is also exploring whether to require all UK businesses to transfer pricing laws to file an International Dealings Schedule reporting details of cross-border, intragroup transactions in another territory's counterparty's location.

In this whitepaper, we explore:

• Details from the UK Transfer Pricing Consultation
• Transfer Pricing in the US
• Operational challenges
• Harmonising data formats
• Guidance for companies who want to automate their transfer pricing operations