INTM450070 - Transfer pricing records: failure to keep and preserve the specified transfer pricing records

Where a UK entity is within scope of the Regulations, the relevant person is obliged to keep and preserve the specified transfer pricing records, unless an exemption applies (see INTM450105 and INTM450106).

A penalty up to £3,000 may be charged to the relevant person (see INTM450030) for each failure to keep or to preserve adequate records in respect of a return (FA98/SCH18/PARA23) and this includes the specified transfer pricing records.

In addition, if a relevant person fails in their obligation to keep and preserve a Master File and/or Local File in accordance with the 2022 Transfer Pricing Guidelines, it may also impact any subsequent penalty considerations should HMRC later identify an inaccuracy in a return where that inaccuracy relates to transfer pricing.

Where a relevant person submits a tax return that contains an inaccuracy and has not kept or preserved the specified transfer pricing records that relate to the inaccuracy, the behaviours associated with that inaccuracy will be presumed to be careless unless the relevant person can demonstrate that they took reasonable care to avoid the inaccuracy (FA07/SCH24/PARA3C). The behaviours may be found to be deliberate if the relevant person gives HMRC a document that they know contains an inaccuracy (see CH81150).

This presumption of carelessness will also apply in circumstances where HMRC makes a discovery of an underassessment of tax relating to transfer pricing and the relevant person is required to keep and preserve specified transfer pricing records but has not done so (FA98/SCH18/PARA49A) & (TMA70/S30C).

Maintaining the specified transfer pricing records is also within the Senior Accounting Officer (SAO) responsibilities and failure to keep the records may be an indication of not establishing and maintaining adequate accounting processes and arrangements (see SAOG01000).