AstraZeneca settles over transfer pricing in UK, agreeing to pay 505 million; GSK slumps on Avandia news

Anglo-Swedish drug major AstraZeneca announced this morning that it has settled a long-running transfer pricing issue with HM Revenue & Customs (HMRC) in the UK. Under the agreement, AstraZeneca will pay £505 million ($778.6 million) to the HMRC to resolve all claims made by it in relation to this issue for the 15-year period from 1996 to the end of 2010. The payment will be made by a first installment of £350 million in March 2010, and a second final installment of £155 million in March 2011. As a result of this agreement, the joint referral of this issue to the UK Tax Court by AstraZeneca and HMRC, as disclosed in the 2008 Annual Report, will be withdrawn.

Resolves other outstanding UK tax matters

As previously disclosed, AstraZeneca has provided in its accounts for the outcome of this issue, at the heart of which are complex transfer price considerations that have taken many years to resolve. As a consequence of the settlement of this issue and other tax matters, AstraZeneca will release part of its provision to earnings.