INTM422100 - Transfer pricing: methodologies: Advance Pricing Agreements: monitoring and review

APA MONITORING AND REVIEW – ANNUAL REPORTS

47. The business is required to lodge annual, at the same time as lodging its annual company tax return form, an Annual Report (AR) signed by the authorised person (defined the same as for the purposes of the company’s tax return form) for each accounting period covered by the APA.

48. For the APA Years where tax returns are already filed, the business is required to lodge an AR within 90 days from the date the domestic agreement is signed.

49. The AR should typically include the following:

  1. A description of the general business operations of the business together with a statement identifying any material differences between the descriptions of the business’s current business operations and those described in the business’s APA application, and if, in the business’s judgment, there were no material differences, an affirmative statement to that effect.
  2. Any relevant schedules reporting the covered transactions for the relevant APA Year, if not already included in the corporation tax computation.
  3. Information and computations necessary to ascertain the outcome of the TPM for the covered transactions for the APA Year, demonstrating the extent of compliance with the transfer pricing methodologies and all other terms and conditions of the APA.
  4. A description of any material changes in financial or tax accounting methods or principles employed for the APA Year in respect of the covered transactions, which differ from the financial or tax accounting methods contained in the APA request, and if, in the business’s opinion, there were no such material changes, an affirmative statement to that effect.
  5. An analysis of any compensating adjustment, if any, required under the APA, and a detailed description or the manner(s) in which the adjustment has been made.
  6. A statement as to whether the business has operated within the critical assumptions detailed in this APA. The statement should include any changes in and/or failure to meet critical assumptions for the relevant APA Year and specific reasons, or if, in the business’s opinion there were no changes in and/or failures to meet critical assumptions, an affirmative statement to that effect.

50. The AR will generally accompany the business’s tax return. The report should be sent to the CCM or, where there is no CCM, the HMRC office responsible for the business’s tax affairs and monitoring the APA. Use the email address: [email protected]. A copy does not need to be sent to BAI.

51. HMRC will review the AR and if necessary, may request further information that is reasonably needed to verify that the business has complied with the terms and conditions of this APA.

52. If the business fails to provide the AR or supply the additional information requested within a reasonable time, HMRC may cancel the APA.