Diverted profits investigations update

In a recent webinar on the status of its diverted profits investigations, HMRC made clear that, in the majority of cases, an acceptable resolution will be achieved through a transfer pricing adjustment without a diverted profits tax charge being incurred. HMRC also revealed that, in its experience, the biggest mistake made by multinationals on transfer pricing is not basing their analysis on what happens in reality ‘on the ground’. Multinationals considered ‘high risk’ can expect forensic investigations in order to defend the transfer pricing position adopted in tax returns. HMRC is still encouraging registration under the profit diversion compliance facility, meaning any such multinationals should review their transfer pricing/DPT positions and consider taking advantage of the facility if appropriate.