A key action in the BEPS project focused on improving the mutual agreement procedure (MAP), which resulted in a new minimum standard to ensure that tax treaty related disputes are resolved in a timely, effective and efficient manner (action 14). This minimum standard is complemented by a set of best practices.

The first six peer review reports relate to implementation by the UK, US, Belgium, Canada, the Netherlands, and Switzerland. The six reports include over 110 recommendations relating to the minimum standard. In stage two of the peer review process, each jurisdiction’s efforts to address any shortcomings identified in its stage one peer review report will be monitored.

The six assessed jurisdictions performed well in various mutual agreement procedure areas, according to the analysis. All provide for roll-back of bilateral APAs with a view to preventing disputes from arising; mutual agreement procedure is available and access to mutual agreement procedure is granted in the situations required by the minimum standard; the competent authority function is adequately resourced, and takes a pragmatic and principled approach for the resolution of mutual agreement procedure cases; and mutual agreement procedure agreements reached so far have been implemented on time.

The main areas where improvements are necessary concern the resolution of mutual agreement procedure cases within the pursued average of 24 months, which the analysis suggests is a challenge for some jurisdictions, especially concerning transfer pricing cases; while mutual agreement procedure guidance is generally clear and accessible, improvements for some jurisdictions are necessary and already under way; and each of the six jurisdictions was given recommendations to align their tax treaty mutual agreement procedure provisions with the Action 14 minimum standard.

In the case of the UK, the OECD analysis noted that the UK has an established mutual agreement procedure program and has extensive experience in resolving mutual agreement procedure cases.  It has a large mutual agreement procedure inventory with a considerable number of new cases submitted each year and more than 300 cases opened on 31 December 2016, of which 65% concern allocation/attribution cases. The UK average time for resolution of such case is 24 months, although the analysis noted that more resource might be required to maintain this in the future in the light of the growing numbers.

The report stated: ‘Overall the UK meets most of the elements of action 14 minimum standards. Where it has deficiencies the UK is working to address these.’

Making Dispute Resolution More Effective - mutual agreement procedure Peer Review Report, United Kingdom (Stage 1) is here.

Report by Pat Sweet