Arcotia Hatsidimitris - International Tax Dialogue

46 – 5. MAINTAINING PROGRESS, TACKLING DELAY
Box 10. United Kingdom - action plan reviews
To help ensure that a transfer pricing enquiry progresses in accordance with the Action Plan, a formal
review must be undertaken at regular intervals but at a minimum of every six months. The review is
recorded on the same template used from the start of the enquiry and must be submitted to the
appropriate Transfer Pricing Panel. The review should contain:
– a summary of progress since the start of the enquiry (or the last review) details of any factors
inhibiting progress and what has been/will be done to counteract them
– a brief résumé of what further work the team intends to carry out
– an assessment of whether the enquiry is likely to settle according to the original timetable set out
in the Action Plan and, if not, what revision is required (including an explanation)
– a re-evaluation of the tax at risk, and a statement regarding the penalty position.
In the UK, HMRC’s governance process ensures that robust management information is held on
the age of all transfer pricing cases. Whilst the Transfer Pricing panels consider individual cases and
provide management challenge to those leading the enquiries, the Transfer Pricing Board regularly
reviews the overall progress against HMRC’s targets for resolving transfer pricing cases. Where
problems are identified it will consider issues such as redeployment of resource and training and
development needs and, more recently the role that Alternative Dispute Resolution (ADR) can play in
moving to resolution.
Alternative dispute resolution
Business, their advisers and tax administrators all told the study team that parties to transfer
pricing disputes can become so deeply entrenched on issues that little progress to resolution is made
over months or even years. Tax administrations have recognised that this type of deadlock can arise in
a range of different types of tax dispute and HMRC has recently been looking at piloting Alternative
Dispute Resolution (ADR), using mediators, in a small number of cases and it has reviewed some
transfer pricing cases that were “sticking” to see whether they might be suitable candidates. But every
time HMRC has looked more closely, it has realised that what is needed is something far more simple
– a reassessment of the case, proper consideration of its merits or otherwise using a fresh pair of eyes
and a reinvigorated action plan developed jointly with the business. In every case considered so far,
that is all that has been needed to progress the case further. This reinforces the case for explicit
governance of transfer pricing cases of the kind that is discussed in Chapter 4. However, some cases
may not be capable of resolution in this way. Recognising this, the study team has looked at a
technique commonly used in alternative dispute resolution for non-tax issues – Early Neutral
Evaluation.
Early Neutral Evaluation (ENE) is the preliminary assessment of the contentions of the parties to
a dispute by an independent and impartial person appointed (and paid) by both parties. Each party’s
assertions are assessed on their facts, supporting evidence and legal arguments by the neutral evaluator
who then expresses a view on the merits of each case. The process is usually conducted by a lawyer,
retired judge or other expert person and is designed to provide a basis for further negotiations, or at
least help the parties avoid more formal (and often highly expensive) dispute resolution processes –
such as litigation. It is a non-binding process that provides an unbiased evaluation of the relative
strengths of each party’s position and gives guidance on the likely outcome should the dispute proceed
further without a significant change in approach by one or both parties. The Technology Court in the
DEALING EFFECTIVELY WITH THE CHALLENGES OF TRANSFER PRICING © OECD 2012