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About In House Tax

This weblog is a news and views site for tax professionals within the UK and international in-house tax community.  You will find information about appointments and people moves in and around the in-house tax market, issues affecting the in-house tax professional, opinions on the state of the tax job market, updates on tax technology, and other general thoughts of the day.

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This site has been developed by Simon Godley, who also runs the niche tax recruitment company Talentpool Selection . Simon spends a lot of his time placing tax specialists into FTSE companies, large in-bound groups and some professional services organisations. He also recruits and is well networked around the UK tax technology and VAT markets.

Tax News

Authorities challenge Glaxo's tax positions

Tuesday, 12 February 2008

Source: International Tax Review

GlaxoSmithKline, the pharmaceuticals company, is fighting two significant international tax battles with the authorities in the US and the UK. The Internal Revenue Service (IRS) is claiming $680 million in back taxes and interest over an intra-company financing assessment. The company reported in its annual results for 2007 that it is also in dispute with HM Revenue & Customs (HMRC) over transfer pricing issues.

The latest disputes with the tax authorities follow the settlement of a long-running transfer pricing dispute where – for an extended period – the IRS and HMRC could not agree on an outcome. The IRS would not accept that HMRC was the competent authority, which would have given British officials the right to be the ultimate arbiter on the issue.

The IRS is challenging deductions arising from intra-company financing arrangements for the years 2001 to 2003. GSK says it will vigorously contest the US tax authority's position.

"The issue relates to interest on intra-company financing that was taken as a deduction on the US income tax return," a GSK spokesman told International Tax Review. "We believe, supported by external professional advice, that this claim has no merit and that no adjustment is warranted. We strictly adhered to the IRS rules regarding intra-company debt and we feel very confident in our position based, in part, on external professional advice that we have received.

"Since this will potentially be a matter of litigation and we are still in ongoing discussions with the IRS, it would be inappropriate for us to discuss any more details at this time," the spokesman added.

The company said if it could not reach a settlement with the IRS, it did not expect the case to go to court before 2010. It would not comment on whether the issue of competent authority could emerge again in this matter.

At the same time, the company remains in dispute with HMRC over transfer pricing. "The dispute with HMRC is not on the same issue. We continue to be in dispute with HMRC primarily in respect of transfer pricing and controlled foreign companies (CFCs) matters for the years 1994 to date," the company spokesman said.

"HMRC has not yet formalised claims in respect of these matters and we are seeking to resolve them in discussions with HMRC. There continues however to be a wide difference between the group and HMRC positions, which may ultimately need to be settled by litigation," he added.

HMRC and the IRS declined to comment for this story.

In September 2006, GSK settled with the IRS in what was then the largest transfer pricing case in the US. The company paid the tax authority $3.4 billion in relation to various transfer pricing issues from 1989 to 2005.

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posted by Simon Godley

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