An advance pricing agreement (APA) is an agreement entered into between HMRC and a taxpayer under which the transfer pricing methodology of controlled transactions is determined before a return is made. APAs are recommended by the OECD (see Chapter IV of the Guidelines) and are intended to give taxpayers confidence that, where the terms of an agreement are complied with, the transfer prices used will be accepted by the tax administration which is party to the agreement. Legislation enabling HMRC to enter into APAs was introduced in 1999 and can now be found at TIOPA 2010, Pt. 5.

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