What does section 257 of TIOPA 2010 do?

Section 257 provides the procedural framework for adjusting company tax returns when a transfer pricing computation changes under section 256. It allows amendments by HMRC or the company, closure notices following enquiries, and discovery assessments where no enquiry is open, ensuring the correct tax liability is collected.

How can HMRC adjust a company's tax return after a transfer pricing change under section 256?

HMRC can adjust a company's tax return in three ways: by amending the return directly, by issuing a closure notice following an open enquiry that reflects the revised transfer pricing figures, or by making a discovery assessment if no enquiry is open and additional tax is due as a result of the section 256 adjustment.

Can HMRC make a discovery assessment for transfer pricing adjustments if the enquiry window has closed?

Yes. Section 257 allows HMRC to make a discovery assessment to recover additional tax arising from a section 256 transfer pricing change, even where no enquiry is open and the normal enquiry deadline has expired. This safeguard ensures transfer pricing adjustments are not lost due to procedural time limits.

Can a company voluntarily amend its own return to reflect a transfer pricing adjustment under section 256?

Yes. Section 257 permits a company to amend its own tax return to reflect a revised transfer pricing position under section 256. This means a company can voluntarily correct its return to include additional profits arising from an arm's length adjustment without waiting for HMRC to act through an enquiry or discovery assessment.

Taxation (International and Other Provisions) Act 2010 section 257

Amendments, closure notices and discovery assessments where section 256 applies

Section 257 deals with how company tax returns may be amended, how HMRC enquiries may be closed, and how discovery assessments may be made in situations where section 256 (regarding the effect of a change in the transfer pricing computation) applies.

Where section 256 applies and a company's tax return needs to be corrected, HMRC or the company may amend the return to reflect the revised transfer pricing position.
HMRC may issue a closure notice following an enquiry into the company's return, adjusting the return to give effect to a transfer pricing change under section 256.
If no enquiry is open, HMRC may make a discovery assessment to recover tax that has become due as a result of a section 256 adjustment.
These provisions ensure that there is a clear mechanism for adjusting tax liabilities when a transfer pricing computation changes, whether through self-assessment amendments, enquiry closure, or discovery.

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