It looks as though Asda and Wal*Mart have succeeded in getting HMRC and the IRS both to recognise a transfer pricing adjustment on royalties – as it’s a settlement, there isn’t a lot of information about, so it isn’t wholly clear whether this was the result of direct negotiation or through invoking the mutual agreement procedures. Either way, Asda has to pay another £115m in tax, whilst Wal*Mart will get a corresponding deduction.
The row has come out in the notes to Asda’s 2009 accounts, and seems to have been over royalties paid by Asda to Wal*Mart, and payments connected with back-office operations. Presumably the royalties were for the use of the Wal*Mart name, which Asda now uses as part of its brand in the UK – possibly also payments for know-how over processes, and rights in databases and the like. The details are scanty, but HMRC was clearly not convinced that Asda were getting good value for the payments.
Curiously, the overall payment from Wal*Mart back to Asda (effectively, a payment to balance the books) – contributed to most of a 53% apparent rise in profits for Asda last year. The motives behind the settlement must have been an interesting mix.