KPMG Warns UK Subsidiaries Over Transfer Pricing

by Caroline Maxwell, Tax-News.com, London

16 September 2002

Accounting firm, KPMG has issued a warning on transfer pricing to subsidiary companies in the UK whose parent organisations are based overseas.

The UK's transfer pricing legislation demands that inter-group international transactions are conducted at 'arm's length', which means that the terms and pricing of such transactions undertaken in the course of conducting business, and in the provision of finance (both borrowing and lending) should be the same as if the transactions had been between completely independent parties.

However, speaking to the Nottingham Evening Post last week, regional KPMG tax partner, Roger Summerton warned that many UK branches are failing to keep adequate paperwork with regard to transfer pricing, assuming that records are being kept elsewhere.

'We are seeing a worrying trend where subsidiaries with overseas parent companies are failing to document inter-company transactions,' he explained to the local newspaper.

Mr Summerton went on to warn that: 'There is no doubt that the Inland Revenue is focusing efforts in this area and, if businesses do not have the right documentation in place to protect them from penalties, then they will end up paying the price.'

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