INTM435070 - Transfer pricing: tax cases - Newidgets Manufacturing Ltd v Jones (SpC197)

The point at issue in this 1999 case was whether. The Inland Revenue was precluded from issuing discovery assessments by virtue of having agreed the taxpayer company’s calculations (and having formally determined appeals). The subject of the further assessments in question was the transfer pricing of a licensing arrangement. They were issued following directions under ICTA88/S770(2)(d).

The Inland Revenue contended that, at the time of making the original agreements with the taxpayer, the Inspector had not been required to consider whether the licensing arrangement had been made on arm’s length terms. And consequently the agreements did not preclude the making of further assessments following the issue of directions under ICTA88/S770(2)(d).

However the Commissioners determined that the facts indicated that the Inspector had directed his mind to the licensing arrangement, possessed sufficient information to form a proper view, and had intended to grant finality. So, having taken the view that the transfer pricing matter had been fully disclosed, discussed and agreed, the Commissioners found in favour of the company.

The decision is silent about the relationship between the assessing machinery and the transfer pricing rules.