INTM573080 - Thin capitalisation: the Advance Thin Capitalisation Agreement: Withdrawing from the ATCA process

If the two sides to the discussions are unable to agree terms which they can live with, both sides can walk away, and the thin cap issue reverts to an annual self-assessment exercise.

If HM Revenue and Customs withdraws from the ATCA process, it will issue a formal statement recording the reasons. HMRC does not have any obligation to continue discussion beyond the point at which it has determined that agreement cannot be reached on terms which it finds acceptable. Any withdrawal from the ATCA process will be monitored and controlled centrally by the Transfer Pricing Team at Business International. A sustained lapse in communications from the applicant may lead HMRC to the conclusion that the ATCA is no longer required, though HMRC will seek to confirm this before closing the case.

Equally, a company may withdraw from the process at any time before final agreement is reached. It would of course be preferable if it could communicate the reasons, in case there is a solution and so that HMRC is aware of possible weaknesses or flaws in the process.

If risk assessment suggests that further enquiry is appropriate after the process has lapsed, a CTSA enquiry will be opened and further enquiries made. For this to happen, a successful business case for enquiry will have to be made under the Transfer Pricing governance rules.

Every effort should be made to reconcile differences and reach an agreement with which both sides can live, as the parties may otherwise find that themselves reassembling eighteen months after the breakdown in communication, following submission of the return and establishment of an enquiry, confronting the same issues.