Technical changes relating to Advance Pricing Agreements for certain financing arrangements
Published 30 October 2024
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This publication is available at https://www.gov.uk/government/publications/corporation-tax-technical-changes-relating-to-advance-pricing-agreements-for-certain-financing-arrangements/technical-changes-relating-to-advance-pricing-agreements-for-certain-financing-arrangements
Who is likely to be affected
Taxpayers that have applied or want to apply to HMRC for Advance Pricing Agreements (APAs) in relation to financing arrangements (such as Advance Thin Capitalisation Agreements) in circumstances where the UK’s transfer pricing rules are only in scope due to persons acting together in relation to those financing arrangements.
General description of the measure
Part 5 Taxation (International and Other Provisions) Act (TIOPA) 2010 is the UK’s APA legislation. It provides for agreements to be entered into between the commissioners of HMRC and businesses which determine the method for pricing related party transactions.
HMRC have recently become aware that there is a technical gap in the circumstances in which an APA may be entered into. Specifically, this gap exists where the UK transfer pricing legislation is only in scope by virtue of section 161 or 162 TIOPA 2010, which apply in certain cases where persons act together in relation to financing arrangements.
This measure will ensure the validity of APAs with businesses in such circumstances, in line with Statement of Practice 1 (2012).
Policy objective
This measure is designed to ensure HMRC can provide businesses with tax certainty in relation to the application of the transfer pricing legislation to certain financing arrangements in line with HMRC Statement of Practice 1 (2012).
This measure does not have an Exchequer impact, as it confirms the position in HMRC’s existing statement of practice.
Background to the measure
The legal basis for APAs is provided by the legislation at sections 218 to 230 TIOPA 2010 (formerly at sections 85 to 87 of Finance Act 1999).
The acting together provisions are found at sections 161 and 162 TIOPA 2010.
Recently HMRC became aware of a technical gap in the legislation that, contrary to the statement of practice, meant APAs could not be entered in cases where the UK transfer pricing rules were only in point due to the acting together provisions.
HMRC’s intention to fix this defect was announced at Autumn Budget 2024.
Detailed proposal
Operative date
This measure will have effect for all chargeable periods from the introduction of TIOPA 2010.
Current law
The UK’s advance pricing agreement legislation is at Part 5 TIOPA 2010.
The UK’s transfer pricing legislation is at Part 4 TIOPA 2010.
Proposed revisions
Part 4 and Part 5 TIOPA 2010 will be amended to ensure the validity of APAs in circumstances where the transfer pricing rules are only in scope by virtue of the “acting together” provisions.
Summary of impacts
Exchequer impact (£ million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is expected to be no impact on individuals as this measure only affects businesses. The measure is not expected to impact on family formation, stability, or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
There are expected to be no impacts for businesses and civil society organisations as this a technical amendment to ensure that the policy works as originally intended. This will provide clarity in relation to the application of the transfer pricing legislation to certain financing arrangements in line with HMRC Statement of Practice 1 (2012).
Operational impact (£ million) (HMRC or other)
This change will have negligible operational impact for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact Martin Voelker, BAI Transfer Pricing, by email: [email protected].