UK and International Tax news
TP and DPT Statistics for 2022/23
Monday 10th February 2025
HMRC has recently published 2022/23 statistics on Transfer Pricing and Diverted Profits Tax yields and related information.
The UK’s transfer pricing rules set out how transactions between connected parties are priced for tax purposes and include transactions between companies in the same group. The rules are designed to ensure that profits are taxed in accordance with the internationally recognised arm’s length principle. HMRC challenges arrangements that do not allocate arm’s length profits to the UK.
In the period 2017/18 to 2022/23, it secured £9.76bn of additional tax by challenging the transfer pricing arrangements of multinationals, with £1.63bn in 2022/23, up from £1.48bn raised in 2021/22.
The transfer pricing yield figures include additional tax revenue from enquiries [real time interventions], Advance Pricing Agreements, Advance Thin Capitalisation Agreements, and transfer pricing Mutual Agreement Procedure cases.
The number of enquiry cases settled from 2017/18 to 2022/23 has averaged 142 per year, with the average time taken to settle cases increasing from 31 months to 33 months, and to 39 months in 2022/23.
Reduced staff numbers in 2022/23 of 397 full time equivalents were down from 398 in 2021/22 dealt with international tax risks, including transfer pricing, DPT, CFC and cross border debt.
In 2022/23, HMRC agreed 15 APAs, down from 20 in 2021/22, with the average time taken to reach APA agreement of 45.5 months, down from 58.3 months in 2021/22.
The number of ATCAs agreed has reduced from 23 in 2020/21 to 7 in 2021/22, and to 5 in 2022/23. The average time taken to reach ATCA agreement increased from 28 months in 2020/21 to 44 months in 2021/22, and to 58 months in 2022/23.
The number of MAP cases resolved increased from 62 in 2020/21 to 131 in both 2021/22 and 2022/23, with the average time taken to resolve cases increasing in 2022/23 to 28 months from 21 months in 2021/22.
Net DPT yield averaged £122m annually over the period 2016/17 to 2021/22 with £198m charged in 2021/22 and £40m in 2022/23. Additional amounts of corporation tax resulting from TP settled investigations into diverted profits have averaged £1.3bn annually with £651m raised in 2021/22 and £293m in 2022/23.
Generally, companies must notify HMRC within three months from the end of the relevant accounting period if they have arrangements that potentially fall within the scope of the DPT legislation, subject to limited statutory exceptions. HMRC then has two years to investigate to determine whether it is reasonable to issue a DPT preliminary notice. Any DPT is payable within 30 days.
The number of DPT notifications received by HMRC reduced from 30 in 2021/22 to 23 in 2022/23, whilst in 2022/23, HMRC issued 14 DPT preliminary notices to 8 groups and 11 DPT charging notices to 6 groups.
HMRC launched its Profit Diversion Compliance Facility in January 2019 which was designed to encourage MNEs with arrangements that might fall within its scope to review the design and implementation of their TP policies, to change them if appropriate and to use the facility to put forward a report with proposals to pay any additional tax, interest and penalties.
HMRC is currently carrying out 90 investigations into MNEs with arrangements to divert profits, including those registered under the PDCF. The total amount of tax under consideration in these cases was £2.6bn as at the end of March 2023.
HMRC has said that it is litigating various international tax risk disputes where the business was not prepared to change their arrangements and pay additional CT. Where HMRC has major concerns about the way that arrangements to divert profits have been implemented, and/or suspicions that they have been misled, references to the Fraud Investigation Service are made. There are a number of large businesses under civil or criminal investigation with HMRC’s Fraud Investigation Service.
HMRC is exploring with professional bodies, large firms of advisers and other tax authorities how to improve the quality of tax advice provided by these firms and how to discourage tax avoidance by large businesses and wealthy individuals. It is also reviewing the effectiveness of its enquiries under the Review of Tax Administration for Large Business programme.
If you would like further information on the above, please contact Keith Rushen on 0207 486 2378.
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