At least one Japanese carmaker is thought to be facing action by the Inland Revenue (IR) over the amount of tax paid on UK profit.

The accounts of Honda Motor Europe, Nissan Motor GB and Toyota Motor Manufacturing UK have come under scrutiny over transfer pricing. Enquiries are focusing on the invoiced prices of parts and cars moving between the UK and other EU countries.

Multi-nationals may be in a position to gain a tax advantage because countries such as the UK are classed as ‘a high tax jurisdiction’, while others are ‘low tax’. The issue appears to be whether carmakers advised tax officials openly on this issue.

IR has kept a close eye on the three carmakers because of tax advantages given to encourage their investment in the UK, rather than elsewhere in the EU.

Nissan says matters relating to 2002 accounts have been cleared up with the IR, and it expects no issues with the 2003 accounts due later this year. Toyota and Honda decline to comment.