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HMRC confirms that transfer pricing documentation is covered by the senior accounting officer regime

In the UK, companies or groups with turnover over £200 million ($300 million) and / or a balance sheet total over £2 billion in the preceding accounting period must appoint a senior accounting officer (SAO).

The SAO is the director, or officer, who has overall responsibility for the company's financial accounting arrangements. The company must tell HM Revenue & Customs (HMRC) who the SAO is, and the SAO will have personal responsibility for confirming that the company establishes and maintains appropriate tax accounting arrangements by issuing a certificate to HMRC by a prescribed deadline.

Failure to do so can result in penalties for the company and the SAO personally. The regime was first introduced for accounting periods beginning on or after July 21 2009 with a light touch approach in the first year under the rules. However for many companies this light touch period has come to an end.

For the purposes of the SAO rules, HMRC views tax accounting arrangements as the framework, responsibilities, policies, appropriate people and procedures in place for managing tax compliance risk and the systems and processes for putting this framework into practice.

HMRC has also recently issued updated guidance and, whilst the guidance does not specifically mention transfer pricing as being part of a company's financial accounting arrangements, HMRC has just confirmed, in correspondence, that it does consider that transfer pricing is included.

Therefore, any decisions or calculations made in respect of transfer pricing adjustments will come within the scope of the SAO rules, regardless of whether they are embedded within the company's accounting system or not.

By principal correspondents for TP Week in the UK, Yvonne Chappell (yvonne.chappell@uk.gt.com), Lorna Smith (lorna.smith@uk.gt.com) and Gillian Kidd (Gillian.kidd@uk.gt.com) , of Grant Thornton UK LLP.

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