Tax authorities’ method of auditing transfer pricing has changed from concentrating on methodology to focusing on implementation.
This makes it more important than ever to ensure your agreements are being correctly implemented and controlled. A good methodology, well documented Advance Pricing Agreements and other transfer pricing documentation may no longer be sufficient if you have not ensured a controlled implementation supported by robust systems, processes and controls. Errors or gaps in your transfer pricing implementation can cause substantial financial costs and damage to your reputation and risk profile with HMRC, so it is essential to ensure these issues are managed properly. It is also becoming increasingly important for companies with complex structures or transfer pricing agreements to be able to accurately model the effect of business or methodology changes on their transfer pricing position. Business decisions may often be made without due consideration to transfer pricing, and as these amounts are often significant, early identification of any transfer pricing implications could be hugely beneficial.