UK: HMRC guidance on transfer pricing aspects of cash pooling

UK: Transfer pricing aspects of cash pooling

HM Revenue & Customs (HMRC) on 6 February 2017 published guidance on the transfer pricing aspects of cash pooling arrangements. The guidance is provided for both taxpayers (and their advisors) and HMRC specialists and client relationship teams, and is structured to cover a full range of issues associated with cash pooling, from its most basic form to some of the more complex issues associated with a substantial cash pool header.

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The guidance includes commentary on:

  • Setting interest rates
  • The consequences of netting balances
  • The possible long-term debt implications for cash pools
  • Withholding tax issues associated with cash pools

KPMG observation

The guidance has been subject to a lengthy period of development within HMRC, and highlights an enhanced focus of HMRC on the transfer pricing implications of related-party financing transactions. In addition to the new guidance, tax professionals in the UK report having seen more ‘live’ enquiries from HMRC in relation to cash pooling arrangements and the role of group treasury entities.

 

Read a February 2017 report prepared by the KPMG member firm in the UK

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