Brexit: UK's Supreme Court to hear arguments in December

The UK’s highest court will convene on December 5 to hear the government's arguments against allowing MPs to vote on triggering Brexit. Debate over the best way to exit the European Union has multiple implications for tax and transfer pricing.

The UK's 11 Supreme Court justices will begin hearing four days of arguments starting December 5 to decide whether Parliament should have a say before the UK invokes Article 50 of the Lisbon Treaty, triggering formal EU withdrawal talks. The court’s ruling is expected to be delivered in 2017.

Prime Minister Theresa May has indicated she expects to start exit talks by the end of March but there has been confusion about whether May has the authority to proceed unilaterally after the High Court ruled last week that Parliament should have a say before the UK invokes Article 50.

The decision on how and when to leave the European Union could have two significant impacts on the transfer pricing environment in the UK: freedom from the relevant EU Directives, and movement of companies or financial and other assets, either into or out of the UK.

Multinationals will need to consider how the changes made during the exit negotiations affect their transfer pricing. In particular, companies will need to examine the impact of the UK no longer being subject to EU Directives and how assets and companies can be moved into, or out of, the UK.

“Depending on market sentiment after a Brexit, relative confidence in the UK economy may cause companies to move their assets or operations to or from the UK,” according to corporate finance adviser Duff & Phelps.

The transfer pricing implications and requirements that could include the following:

  • Debt capacity and interest rate reviews for new investments;
  • Comparison of alternative intellectual property (IP) holding jurisdictions, IP valuation and transfer and royalty rate reviews;
  • Supply chain reviews including risk allocation and centralisation of high value functions; and
  • Resolution of existing transfer pricing audits or litigation.