The APA is a legal mechanism by which hmrc allows companies to agree on transfer pricing for transactions with related parties. Where APAs are in effect and under agreed terms, APAs provide a guarantee of the tax status arising from these transfer pricing agreements. While an ATCA must apply to paid periods for which no return has been made (or is not yet due), the contract may also apply to periods that expired prior to the conclusion of the contract. TIOPA10/S224 (1) allows the agreement to be effective for an earlier period and may provide, in accordance with Directive S224 (3), how any adjustments to be made as a result of the agreement should be made. It is also significant that the number of ATCs in force has increased from 577 in 2014/2015 to 366 in 2017/18, indicating that taxpayers are not trying to extend atCAs as soon as they expire, or simply not to apply for ATCA. This can be explained by an increase in the average unification time from 11.3 months in 2014/15 to 17.5 months in 2017/18. In 50% of cases, the time required to reach an agreement has increased similarly and the longer timeframe is expected to increase the cost of the process, both in terms of time and professionally. As with APA, there does not appear to be a single reason for the apparent decline in taxpayer participation in the ATCA process. HMRC`s transparency requirements, as well as increased costs and current administrative time for thieves, may have exceeded the benefits of safe processing, particularly when companies feel that HMRC`s findings are unfair.
Since an ATCA can work after the fact, there is no reason why an ATCA should not be submitted after an application has been opened. Both can co-exist, the ATCA application being, I hope, able to do so. An ATCA submitted as part of an HMRC application should first contain all outstanding information and any new information appropriate to the request. Previous periods can be accounted for either in “reverse” of ATCA`s terms in previous years, or in a separate agreement detailing the revised figures. The ATCA is a legally binding agreement between HMRC and the subject on the tax treatment of the financial provision and, as such, ctSA returns that do not comply with the provisions of the ATCA may leave the subject with tax penalties. The negotiation period usually depends on the complexity of the case. Simple cases can sometimes be resolved through emails, letters and appeals, while more complex agreements may require a series of meetings before reaching an agreement. Both HMRC and the taxpayer have the right to be concerned about the ATCA process if one of the parties feels that it is not possible to reach an agreement. In this case, the thin-cap question will go back to an annual self-assessment.
It is up to the taxpayer to contact HMRC when he requests an ATCA. The first contact must clearly contain a statement that the agreement will be obtained by HMRC in accordance with S218 TIOPA 2010 (formerly S85 FA99). The application should contain information on the entity that aspires to the agreement and the broader group to which it belongs, as well as on the economic and industrial context, as well as on a financial model including forecast profits and bar production for a given period.