The United Kingdom’s HM Revenue and Customs on May 26 opened a consultation on a proposal to add a secondary adjustment mechanism to its transfer pricing legislation.
The proposal seeks to reverse the cash benefit that accrues to multinational enterprises that do not use arm’s length pricing and thus receive a transfer pricing adjustment. A tax charge would be imposed on the excess cash arising from the MNE’s non-arm’s length pricing.
The government said secondary adjustment rules are an internationally recognized method of realigning the economic benefit of transactions subject to a transfer pricing adjustment. The consultation asks a series of questions to assist in the design of the rules.
The consultation will run until August 18.
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