INTM422050 - Transfer pricing: methodologies: Advance Pricing Agreements: expression of interest

The initial contact - the expression of interest (EOI) process

20. The APA process is initiated by the business, but HMRC requires an enterprise interested in applying for an APA contacts us first to informally discuss its plans before presenting a formal application. This is to ensure that the resources of the business are not wasted on an unsuitable application, and to ensure that the detailed work that will need to be undertaken by the business in finalising its application is focused on relevant issues. It also gives HMRC an opportunity to outline a realistic anticipated timetable for agreeing an APA based on past experience, or to discuss other practical ‘process’ issues with the business. In relation to bilateral/multilateral APAs, businesses should approach each state to discuss their intention for a bilateral/multilateral APA.

21. The contact details for an EOI in an APA and for making an APA application is by
email to: APA.mailbox@hmrc.gov.uk.

Where the enterprise has a CCM they should also make the CCM aware of their interest in an APA and send them a copy of the correspondence.

22. The EOI should generally cover:

  • the nature of the transfer pricing issues intended to be covered by an APA
  • details of the tax residence of the parties involved and the importance to the wider business of the transactions intended to be covered
  • a description of the proposed transfer pricing method;
  • an indication of the nature of any current enquiries which may impact on the proposed covered transactions, in the UK or overseas, particularly transfer pricing, but not exclusively;
  • brief details of any APA or MAP requests, APA agreements or other rulings, in the UK or overseas, in respect of the covered transactions or transactions with the same, or substantially the same fact pattern, including requests made to third states, made by either of the parties to the proposed APA; and
  • any other relevant issues that the business is aware of in the context of the suggested APA including the potential of DPT to apply to the covered transactions

HMRC’s experience is that discussion of these issues at a meeting is much speedier and more productive than correspondence. This meeting may be by video conference where more efficient. HMRC is usually able to indicate at the conclusion of an EOI discussion whether it will be prepared to consider an application for an APA. Although HMRC would not dictate what methodology must be included in the application, HMRC may, based on its experience, highlight areas of concern in relation to the proposal; in particular where HMRC believes it does not result in an arm’s length outcome. The APA process is based on openness and collaboration, so HMRC will share their views with the business from the start; however, the business is still entitled to submit an APA as best accords with what they believe to be the most appropriate arm’s length pricing which will then be tested as part of the APA process. Provision of details of the proposed covered transactions, and any slide presentation intended to be given to HMRC beforehand, will help make the EOI meeting as productive and informative as possible.

23. An EOI can best be evaluated where the identity of the business is known. HMRC’s experience is that there is little to be gained from entering discussions without knowing the identity of the business, as HMRC cannot make any commitment over acceptance into the APA Programme until the identity of the business is known.

24. In the event that HMRC considers that an application should not be admitted into the APA Programme, HMRC will advise the business of the reasons why HMRC takes that view and will allow the business the opportunity to make further representations within 28 days of receiving that notice. However, there is no right of admission into the APA Programme.