MFA submitted a comment letter to HMT’s Revenue and Customs’ consultation regarding the reform of UK law concerning transfer pricing, permanent establishment (PE), and diverted profits tax (DPT). In the letter, MFA appreciates the goal of simplifying UK tax code and staying aligned with international standards, but expresses concerns related to transfer pricing, PE, and DPT.
Regarding transfer pricing, MFA encourages the replacement of the term “provision” with “conditions” to align with international standards and to create an exemption from the UK transfer pricing rules for purely domestic transactions. In the context of PEs, MFA expresses that proposed changes may not clarify or improve the situation for asset managers and could make existing arrangements more difficult to operate. MFA generally agrees with incorporating DPT into the corporation tax charge and highlights the benefits of removing the avoided PE basis for applying DPT.
Additionally, MFA emphasizes the need for careful consideration of the potential impacts of proposed changes and suggest specific legislative protections to address challenges posed by the reforms.