AstraZeneca pays £505m to settle long running UK tax dispute - Mazars - United Kingdom
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AstraZeneca pays £505m to settle long running UK tax dispute
Further evidence of the tough line that tax authorities are taking in relation to transfer pricing was revealed today with AstraZeneca announcing that it has paid £505m to settle its long running UK tax dispute.
The settlement covers transfer pricing issues which were under investigation by HM Revenue and Customs for the period 1995 to 2010. This follows on from other settlements between businesses and tax authorities across various industries and countries such as the high profile $3.4 billion settlement that GlaxoSmithKline paid to the US authorities to conclude transfer pricing investigations a few years ago.
Transfer pricing concerns the price at which related parties, typically group companies, sell goods or services to each other. Tax authorities around the globe are increasingly challenging the transfer pricing policies and practices of multinational business by introducing compliance legislation and undertaking audits. For example, in the last few months legislation has been introduced or updated in a number of countries, including France and Ireland. This is hardly surprising given the amounts of tax that are at stake and the complexity of the issues involved.
The implications of this settlement are likely to be that tax authorities will be encouraged to target and pursue transfer pricing risks even more vigorously. In the UK for example HMRC have secured half a billon pounds from this one settlement alone in addition to their significant victory in the " Dixons " litigation case last Summer. With many governments short of revenues it is likely that this settlement will reinforce their view that transfer pricing represents an effective way of increasing tax receipts.
To counter this risk businesses should ensure that they are complying with the law in all of the countries in which they operate. This will typically mean preparing documentation to comply with local compliance regulations and updating it as and when there are any business changes. Unfortunately the requirements of the law can vary from country to country and therefore it is rarely a case that "one size fits all". The benefit of preparing such documentation however is that the risks of incurring significant tax, audit, penalty and time costs should be considerably mitigated.
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