Clause 33 - Provision not at arm's length:
Finance Bill
3:45 pm
Mr John Burnett (Shadow Minister, Home Affairs; Torridge and West Devon, Liberal Democrat)
I repeat the point that I made earlier. I stress to the Paymaster General that I do not want companies to avoid the transfer pricing rules, but if a company innocently goes over the threshold into the large company regime, and for various reasons—it may not have much experience or it may be an international trading group that has a bonanza profit in one year that takes it over the threshold—I hope that the Inland Revenue would, to use the words that I used earlier, be merciful and mitigate the penalties.
I have also had a submission from the Confederation of British Industry, which says:
''The transitional period to April 2006 only provides for the remission of penalties arising from inadequate records, and not for any other reason. The Inland Revenue Technical Note published with the Autumn 2003 Pre-Budget report said that the transitional rules 'are designed to give businesses more time to develop an understanding of transfer pricing requirements, and to adopt appropriate systems, before being exposed to penalties for failure to do so.' The remission of penalties for inadequate records only would not achieve this. A general remission of penalties is needed if the introduction of the new regime is not to place unreasonable burdens on taxpayers, particularly those mainly UK larger businesses, such as retailers, which have had little or no experience of transfer pricing issues to date.''
I had hoped to hear from the Paymaster General on both the former and latter points. On the former, I am not trying to wriggle out of the transfer pricing rules. I am just asking whether the Revenue will mitigate the penalties regime in relation to a company that quite
innocently goes over the threshold into the larger company regime for transfer pricing.