Response to the Consultation Document on Transfer Pricing Documentation published 23 March, 2021.

Frazier & Deeter UK LLP [‘’FD’’ or ‘’We’’] would like to submit our response with respect to the
applicability of i) UK local file and ii) International Dealing Schedule.

UK Local File

As per the consultation document, taxpayers of MNE Groups with consolidated group turnover of Euro 750 million or more [i.e., CbC reporting groups] will be required to file a master file or local files on request. While we welcome this threshold in general, it will be useful for MNE Groups who are not part of the CbC reporting regime to have guidance in place with respect to the format of a UK local file. The transfer pricing regulations of some of our major trading partners (for example, the US) do not have a threshold for maintaining transfer pricing documentation and taxpayers operating in such regions may be required to maintain and file TP documentation irrespective of the exemption available in UK. For such categories of MNE Groups it will be useful to have HMRC guidance in place specifically aligning the UK local file to the OECD format so that the following objectives may be achieved:

  • The functional analysis, arm’s-length justification and benchmarking used in such UK local files may be mirrored in the local file of the other jurisdiction in case the UK entity is tested for transfer pricing analysis. This will ensure consistency in the approach taken in both the jurisdictions.
  • In the event of any HMRC enquiry, such UK local file may be produced as defence document for justification of arm’s-length pricing of inter–company transactions.

International Dealing Schedule

With respect to the International Dealing Schedule, whilst we welcome the exemption provided to small and medium sized business, we would request HMRC to issue guidance on the format of maintaining records with respect to arm’s-length pricing of high value intangible transfers or licensing transactions. Considering that even a small or medium sized taxpayer may face future enquiry or litigation on such high value intangible transfers, an abridged transfer pricing form for reporting such transactions may be implemented for all categories of taxpayers. This will help all taxpayers to prepare documentation in advance for any future enquiry or litigation on such transactions.

We will be happy to engage in any form of consultation on the above aspects and will be happy to participate in any policy design consultation meetings.

If you have any questions on the above response or would like to discuss, please contact Malcolm Joy, Partner, Frazier & Deeter UK LLP. The contact details are provided below:

Direct: +44 7818012270

We thank you for this opportunity to provide our views on the Transfer Pricing Documentation consultation document.