UK vs REFINITIV AND OTHERS (Thomson Reuters): CASE SUMMARY
Case Information
- Court: Court of Appeal (Civil Division)
- Case No: CA-2023-002584
- Applicant: Refinitiv Limited and affiliates (including Thomson Reuters Corporation)
- Defendant: HMRC (His Majesty’s Revenue and Customs)
- Judgment Date: 15 November 2024
- Download the FULL JUDGMENT
Judgment Summary
The Court of Appeal’s decision in Refinitiv v HMRC is a defining moment in the intersection of transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... and Diverted Profits TaxDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its... (DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its...). The case revolved around DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its... notices issued to three UK-resident companies within the Thomson Reuters group for the 2018 tax period, totaling over £167 million. The dispute arose from conflicting interpretations of an expired Advance Pricing Agreement (APAAdvance Pricing Agreements (APAs) have emerged as a critical tool for managing transfer pricing challenges. APAs are formal agreements between a taxpayer—often a multinational enterprise (MNE)—and one or more tax authorities that pre-determine the appropriate transfer pricing methodology for specified intercompany transactions over a set period, typically up to five years, with the possibility of renewal. The primary purpose of...) between the companies and HMRC.
At the heart of the case was the APAAdvance Pricing Agreements (APAs) have emerged as a critical tool for managing transfer pricing challenges. APAs are formal agreements between a taxpayer—often a multinational enterprise (MNE)—and one or more tax authorities that pre-determine the appropriate transfer pricing methodology for specified intercompany transactions over a set period, typically up to five years, with the possibility of renewal. The primary purpose of..., concluded in 2013, which governed the pricing of intra-group servicesFOR MORE INSIGHT ON INTRA-GROUP SERVICES, PLEASE READ THIS ARTICLE: Intra-Group Services: Guidelines, Examples, and Risk Management Strategies Intra-Group Services refer to activities performed by one entity within a multinational enterprise (MNE) group that benefit one or more associated enterprises. These services may include administrative, technical, financial, or commercial assistance provided by a central company to its affiliates. A primary... for the period 2008–2014. This agreement specified the Transactional Net Margin Method (TNMM)The Transactional Net Margin Method (TNMM) is one of the five primary transfer pricing methods recognised under the OECD Transfer Pricing Guidelines. TNMM is applied to evaluate whether the conditions of a controlled transaction between associated enterprises are at arm’s length. Unlike traditional transaction methods, which directly compare prices or gross margins, TNMM compares the net profit margin relative to... as the applicable transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... methodology, determining remuneration for UK entities using a cost-plus markup. HMRC’s later application of DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its... involved recalculating profits for the 2018 period, employing a profit-split methodThe Profit-Split Method (PSM) is a critical tool in transfer pricing, used to allocate profits or losses among associated enterprises participating in controlled transactions. This method is particularly relevant when transactions involve integrated operations or unique and valuable intangibles that make comparable uncontrolled prices challenging to establish. The PSM ensures compliance with the arm's length principle, requiring that profits are... instead. Refinitiv contended that the APAAdvance Pricing Agreements (APAs) have emerged as a critical tool for managing transfer pricing challenges. APAs are formal agreements between a taxpayer—often a multinational enterprise (MNE)—and one or more tax authorities that pre-determine the appropriate transfer pricing methodology for specified intercompany transactions over a set period, typically up to five years, with the possibility of renewal. The primary purpose of... principles should govern these calculations, given their relevance to services provided during the APA’s duration.
The Court of Appeal upheld the Upper Tribunal’s earlier decision, concluding that the APA’s temporal and statutory scope was confined to the periods it explicitly covered. It determined that the APAAdvance Pricing Agreements (APAs) have emerged as a critical tool for managing transfer pricing challenges. APAs are formal agreements between a taxpayer—often a multinational enterprise (MNE)—and one or more tax authorities that pre-determine the appropriate transfer pricing methodology for specified intercompany transactions over a set period, typically up to five years, with the possibility of renewal. The primary purpose of... did not apply to the 2018 period, even though the services at issue had been rendered during its term. The Court emphasized that extending the APA’s principles beyond its defined duration would undermine its purpose and the legislative framework governing APAsAdvance Pricing Agreements (APAs) have emerged as a critical tool for managing transfer pricing challenges. APAs are formal agreements between a taxpayer—often a multinational enterprise (MNE)—and one or more tax authorities that pre-determine the appropriate transfer pricing methodology for specified intercompany transactions over a set period, typically up to five years, with the possibility of renewal. The primary purpose of.... This decision reaffirms the need for multinationals to anticipate and adapt to evolving tax regulationsTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public... proactively.
The ruling is particularly significant for its insights into the interaction between APAsAdvance Pricing Agreements (APAs) have emerged as a critical tool for managing transfer pricing challenges. APAs are formal agreements between a taxpayer—often a multinational enterprise (MNE)—and one or more tax authorities that pre-determine the appropriate transfer pricing methodology for specified intercompany transactions over a set period, typically up to five years, with the possibility of renewal. The primary purpose of... and newer tax regimes like DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its.... It underscores the necessity for precise APAAdvance Pricing Agreements (APAs) have emerged as a critical tool for managing transfer pricing challenges. APAs are formal agreements between a taxpayer—often a multinational enterprise (MNE)—and one or more tax authorities that pre-determine the appropriate transfer pricing methodology for specified intercompany transactions over a set period, typically up to five years, with the possibility of renewal. The primary purpose of... terms and highlights the risks of relying on expired agreements in disputes over later tax periods.
