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A-Day
Under the new simplified pensions régime beginning on 6 April 2006, new legislation affecting employers' contributions to employee pension schemes will become effective. Patrick Stevens, senior tax partner at Ernst & Young, says that HMRC have now indicated that the new rules will apply to all employers' contributions paid in accounting periods ending on or after 6 April 2006 which means that 'many employers, such as those with 30 June year ends, may well already be within the new rules, or may be subject to the new rules earlier than otherwise anticipated'.
He says that 'under the new rules, where an employer makes contributions to a registered pension scheme which are significantly more than in the previous accounting period, the tax relief may be spread over up to four accounting periods. The spreading of relief only applies if the contributions exceed 210% of those paid in the previous accounting period and such excess is at least £500,000. This means that there is a delay in getting tax relief'. Thus he recommends that employers contemplating making additional contributions, should consider making a payment before the end of their current accounting period if there is a possibility that the contribution might not be spread. He adds that 'An additional benefit of making a payment under the current rules is that it increases the base level of contribution for the purpose of the 210% test once the new rules come into effect. Calendar year companies intending to make sizeable pension contributions should consider whether a payment be made before 31 December 2005'.
Global complexity
The increase in cross-border business investment by multinational corporations in Eastern Europe and Asia is presenting new transfer pricing challenges, according to a new survey, Global Transfer Pricing Trends, Practice and Analysis by Ernst & Young. The survey shows that, with more countries taking action on transfer pricing, transfer pricing risk management is a dominant issue for multinational corporations.
Over 25% of respondents reported either new or relocated manufacturing operations in the past two years. 35% identified China as the leading relocation destination and 25% identified eastern European countries, i.e. Hungary, Czech Republic and Poland.
The survey also showed that tax directors are more involved in business change. Globally, 68% said that the tax function is involved with business change at the concept and initiation phases, compared to 43% five years ago. The pharmaceutical and retail sectors are most affected according to the survey, with 57% of respondents in the pharmaceutical sector and 46% of respondents in the retail sector saying that transfer pricing is the 'single most important issue'.
www.ey.com/transferpricingsurvey
