Details

  • Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 2/17/2012

United Kingdom - Updated advance thin capitalisation agreement (ATCA) procedures 

February 17:   Companies can obtain certainty from HM Revenue & Customs (HMRC) for the interest relief available to UK borrowers by seeking an advance thin capitalisation agreement (ATCA).

An ATCA governs the amount of interest that a company can claim as a deduction for its tax computations—typically for a three- to five-year period.


ATCAs are governed by a recently updated HMRC Statement of Practice (SP1/12). The updated SP1/12 also includes a new “model ATCA,” which HMRC expects taxpayers to follow in making their ATCA applications.


Key points of SP1/12

  • The new SP1/12 confirms HMRC’s view that an ATCA is to be sought as soon as possible following a transaction.
  • It also provides the possibility of a “short-term” ATCA—which might be of particular value when the term of the financing is in excess of five years but not long enough to warrant a second ATCA.
  • It confirms a target time period of 28 days for HMRC to consider an ATCA application, and provides guidance concerning the timing of actions.
  • The application process is amended so that now, ATCA applications can be made to the taxpayer’s Client Relationship Manager or its HMRC contact first, before being referred to a specialist.

The model ATCA itself has not significantly changed, but is mainly updated to reflect the transfer pricing rules in the Taxation (International and Other Provisions) Act 2010.


What does this mean?

  • All ATCA negotiations that are made now are to follow SP1/12—both from HMRC’s perspective and from the perspective of applicant companies.
  • The new guidance highlights the fact that HMRC sees transfer pricing (and thin capitalisation in particular) as a “hot topic” and is focusing attention on it.

For more information, contact a tax professional with KPMG in the United Kingdom:


Daniel Head

+44 161 2464742


Stuart McDougall

+44 113 2313357



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