United KingdomUnited Kingdom

Legal ReferenceSection 147 Taxation (International and Other Provisions) Act 2010 Section 164 Taxation (International and Other Provisions) Act 2010

147 Tax calculations to be based on arm's length, not actual, provision (3) The profits and losses of the potentially advantaged person are to be calculated for tax purposes as if the arm's length provision had been made or imposed instead of the actual provision.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

The UK’s transfer pricing legislation incorporates a requirement that it be interpreted as “best secures consistency” with the OECD TPG.

Legal ReferenceSection 148 Taxation (International and Other Provisions) Act 2010 Sections 157 – 163 Taxation (International and Other Provisions) Act 2010 Consultation on the reform of transfer pricing, permanent establishment and Diverted Profits Tax Draft legislation: transfer pricing

147 Tax calculations to be based on arm's length, not actual, provision (1) For the purposes of this section “the basic pre-condition” is that— (a) provision (“the actual provision”) has been made or imposed as between any two persons (“the affected persons”) by means of a transaction or series of transactions, (b) the participation condition is met (see section 148), (…) 148 The “participation condition” (1) For the purposes of section 147(1)(b), the participation condition is met if— (a) condition A is met in relation to the actual provision so far as the actual provision is provision relating to financing arrangements, and (b) condition B is met in relation to the actual provision so far as the actual provision is not provision relating to financing arrangements. (2) Condition A is that, at the time of the making or imposition of the actual provision or within the period of six months beginning with the day on which the actual provision was made or imposed— (a) one of the affected persons was directly or indirectly participating in the management, control or capital of the other, or (b) the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons. (3) Condition B is that, at the time of the making or imposition of the actual provision— (a) one of the affected persons was directly or indirectly participating in the management, control or capital of the other, or (b) the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the affected persons. (4) In this section “financing arrangements” means arrangements made for providing or guaranteeing, or otherwise in connection with, any debt, capital or other form of finance. (5) For the interpretation of subsections (2) and (3) see sections 157 to 163. Sections 157 to 163 of the UK legislation define direct and indirect participation in the management, control or capital of a person by reference to the definition of control at section 1124 Corporation Tax Act 2010. The TP provisions set out rules regarding the attribution of rights and powers to a person when considering whether that person controls a company or partnership.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on transfer pricing methods contained in the OECD TPG is effectively incorporated within UK legislation, including the freedom for MNE groups to apply other methods where they are more appropriate than OECD-recognised methods based on the facts and circumstances of the case.

• CUP (provided)
• Resale Price (provided)
• Cost Plus (provided)
• TNMM (provided)
• Profit Split (provided)
• Other (provided)

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on transfer pricing methods contained in the OECD TPG is effectively incorporated within UK legislation.

• Hierarchy of methods (not selected)
• Most appropriate method (selected)
• Other (not selected)

Legal ReferenceSection 147 Taxation (International and Other Provisions) Act 2010 Chapter 4, Part 8 Corporation Tax Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on controlled transactions involving commodities contained in the OECD TPG is effectively incorporated within UK legislation in relation to transactions involving commodities other than oil won from an oil field in the UK. In the case of oil won from an oil field in the UK, there is a requirement that its disposal is priced at market value on a specified date rather than the arm’s length price.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on comparability analysis contained in the OECD TPG is effectively incorporated within UK legislation.

There is a preference for comparable data from transactions in comparable markets. This will be informed based on the transaction(s) in questions, the characteristics of the market and availability of comparable data.

Secret comparables should not be used for transfer pricing assessment purposes.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on the arm’s length range and statistical measures contained in the OECD TPG is effectively incorporated within the UK’s legislation. The use of a range and statistical tools are applied in the pricing of controlled transactions where the use of such measures is considered appropriate in accordance with the OECD TPG.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on comparability adjustments contained in the OECD TPG is effectively incorporated within UK legislation.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on intangibles contained in the OECD TPG is effectively incorporated within UK legislation.

Legal ReferencePart 8 Corporation Tax Act 2009 Part 9 Corporation Tax Act 2009 Consultation on the reform of transfer pricing, permanent establishment and Diverted Profits Tax Draft legislation: transfer pricing

Part 8 Corporation Tax Act 2009 contains provisions regarding the tax treatment of intangible fixed assets. Part 9 Corporation Tax Act 2009 contains provisions regarding the tax treatment of transactions involving know how and patents. These rules set out a self-contained regime for the corporation tax treatment of transactions involving certain intangible fixed assets and may require the application of valuation standards different to the arm's length principle, such as market value, where relevant intangible assets are transferred between related parties and certain conditions are met.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on hard-to-value intangibles contained in the OECD TPG is effectively incorporated within UK legislation.

Legal ReferenceINTM440176 – Transfer Pricing: Types of transactions: Intangibles: Establishing an arm’s length price for valuable intangibles: Hard to Value Intangibles

There are no specific conditions beyond those described in 6.186 - 6.195 of the TPG.

The analysis of HTVI transactions does not differ from the analysis established in Chapters I and VI of the TPG. Provided none of the exemptions are met, the HTVI guidance permits tax authorities to consider ex post outcomes as presumptive evidence as to the reasonableness of the projections used on an ex-ante basis to determine the pricing of a transaction involving transactions between associated enterprises.

Legal ReferenceCH51300 – Assessing Time Limits

The standard statute of limitations which applies to all tax returns also applies to HTVI transactions. This allows an assessment of tax to be made on a taxpayer, following a discovery that their return is incorrect, up to 4 years after the end of the return period in any case, up to 6 years after the end of the return period where the return is incorrect due to careless behaviour by the taxpayer and up to 20 years after the end of the return period where the return is incorrect as a result of deliberate behaviour by the taxpayer.

Bilateral or multilateral APAs can be requested under the general terms and conditions in UK double tax treaties.

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the use of hindsight for transfer pricing purposes in the UK is governed by the guidance provided in the TPG. UK TP audits are reviewed and discussed on a recurring basis and are subject to robust governance procedures. Transfer pricing staff in His Majesty’s Revenue and Customs (HMRC) are highly qualified professionals. Internal instructions, training and knowledge sharing are provided on an ongoing basis.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on intra-group services contained in the OECD TPG is effectively incorporated within UK legislation.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of the UK’s legislation as best secures consistency with the OECD TPG, the guidance on low value-adding intra-group services, including the simplified determination of arm’s length charges for these services, contained in the OECD TPG is effectively incorporated within UK legislation.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010 Chapter 2, Chapter 4 and Chapter 5 Part 4 Taxation (International and Other Provisions) Act 2010 Consultation on the reform of transfer pricing, permanent establishment and Diverted Profits Tax Draft legislation: transfer pricing

Any guidance incorporated within the OECD TPG is effectively incorporated within UK legislation by the requirement to interpret that legislation as best secures consistency with those Guidelines. Consequently, the guidance on financial transactions within the amendments to the TPG made by the Report on Transfer Pricing Guidance on Financial Transactions (BEPS Actions 4 and 8-10) are indirectly incorporated within UK’s legislation. In addition, UK domestic legislation contains specific provisions regarding transactions involving the giving of a security and a series of transactions involving the provision of a guarantee in respect of a security (sections 152 to 154); definitions of related parties in cases involving financing arrangements (sections 161 and 162); alternative methods for claiming a corresponding adjustment if a security is involved (sections 182 to 184); tax treatment of excessive interest (sections 187 and 187A) and the position of a guarantor of an affected person’s liabilities under a security issued by the person (sections 191 to 194). All references are to Taxation (International and Other Provisions) Act 2010.

Legal ReferencePart 10 Taxation (International and Other Provisions) Act 2010 Schedule 7A Taxation (International and Other Provisions) Act 2010

The UK has specific rules governing the tax treatment of financial transactions, which are primarily contained within Parts 5, 6 and 7 Corporation Tax Act 2009. The deductibility of interest is subject to various rules, including in particular rules designed to combat avoidance and mismatches. In 2017, the UK introduced corporate interest restriction rules to combat attempts by multinational enterprises and other companies to obtain excessive tax relief for net interest and similar financing costs in line with the Final Report on Action 4 of the OECD’s work on Base Erosion and Profit Shifting. In the same year, the UK also introduced anti-hybrids legislation to give effect to the recommendations on Action 2 of the OECD’s work on Base Erosion and Profit Shifting.

Legal ReferenceSection 164 Taxation (International and Other Provisions) Act 2010

Given the requirement for interpretation of UK’s legislation as best secures consistency with the OECD TPG, the guidance on cost contribution arrangements contained in the OECD TPG is effectively incorporated within UK legislation.

Legal ReferenceThe Taxes (Base Erosion and Profit Shifting) (Country-by-Country) Reporting Regulations 2016 The Transfer Pricing Records Regulations 2023 INTM450000 - Transfer pricing records

• Master file consistent with Annex I to Chapter V of the TPG (selected)
• Local file consistent with Annex II to Chapter V of the TPG (selected)
• Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
• Specific transfer pricing returns (separate or annexed to the tax return) (not selected)
• Other (specify): (not selected)

Legal ReferenceThe Transfer Pricing Records Regulations 2023 INTM450000 - Transfer pricing records INTM450104 - Transfer pricing records: materiality of a category of controlled transactions Consultation on transfer pricing scope and documentation

The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 require UK-headed groups with consolidated global revenue of at least €750m to file a CbC report in the UK. The CbC report has to be filed within 12 months following the end of the period to which it relates. In 2023, The Transfer Pricing Records Regulations 2023 were introduced to mandate the preparation and retention (but not filing) of the local and master files by UK entities within a multinational group with consolidated global revenue of at least €750m. Both the master file and local file must be prepared in accordance with the approach covered at Chapter V of the TPG (including Annex I and Annex II to Chapter V. The Regulations apply: • for Corporation Tax purposes, to accounting periods beginning on or after 1 April 2023 • for Income Tax purposes, from the 2024 to 25 tax year UK entities not within scope of the Regulations are required by law to keep such records as are required to make and deliver a correct and complete return. This includes records to demonstrate that the results of transactions with related parties are determined for tax purposes according to transfer pricing rules (and in particular, the application of the arm’s length principle), unless the UK entity is covered by an exemption, such as the small and medium sized enterprises exemption.

Legal ReferenceThe Taxes (Base Erosion and Profit Shifting) (Country-by-Country) Reporting Regulations 2016 Paragraph 23, Schedule 18 Finance Act 1998 (Penalty for failure to keep and preserve records) Section 227 Taxation (International and Other Provisions) Act 2010

There are penalties for not filing a CbC report and also for inaccurate information when filing a CbC report. UK entities within the scope of the Transfer Pricing Records Regulations may be charged a penalty if they fail to keep or preserve the relevant records (the master file and the local file). Additionally, a penalty may be charged for false or misleading statements made in connection with an application for an Advance Pricing Agreement.

Legal ReferenceThe Transfer Pricing Records Regulations 2023 - Exclusions Section 166 Taxation (International and Other Provisions) Act 2010 (Exemption for small and medium-sized enterprises) Section 172 Taxation (International and Other Provisions) Act 2010 (Meaning of “small enterprise” and “medium-sized enterprise”) Consultation on transfer pricing scope and documentation

Both the Country-by-Country Reporting Regulations 2016 and The Transfer Pricing Records Regulations 2023 apply only to UK entities which are members of a multinational group with consolidated global revenue of at least €750m. The Transfer Pricing Records Regulations include specific exemptions for most UK-to-UK transactions, and for transactions covered by an APA which was agreed prior to the date the regulations commenced. UK entities not within the scope of these requirements remain subject to the general record-keeping obligations outlined in box 30 above. The UK also has a broad exemption from transfer pricing legislation for small or medium-sized enterprises.

Legal ReferencePart 5, Taxation (International and Other Provisions) Act 2010 http://www.legislation.gov.uk/ukpga/2010/8/part/5 Statement of Practice 2/10 Statement of Practice 1/18 Section 124, Taxation (International and Other Provisions) Act 2010 United Kingdom’s MAP Profile Profit Diversion Compliance Facility Guidance INTM422160 - Cost Contribution Arrangements under the Advance Pricing Agreement Legislation

Taxpayers can apply for binding rulings in UK courts on tax related matters, and therefore also questions on transfer pricing. For further information on MAPs and APAs, please refer to UK’s MAP Profile. HMRC operates a Profit Diversion Compliance Facility, which encourages businesses to correct their transfer pricing arrangements without the need for direct intervention by HMRC. In June 2025, HMRC issued guidance on the availability of ‘CCA APAs’, which provide unilateral clearance on the validity of the participation of a UK entity in a CCA- an area that was giving rise to transfer pricing disputes.

• Rulings (selected)
• Enhanced engagement or cooperative compliance programmes (selected)
• Advance Pricing Agreements (APA) (selected)
• International Compliance Assurance Programme (ICAP) (selected)
• Mutual Agreement Procedures (selected)
• Other (please specify): (not selected)

The UK has made a political commitment to respect the application of the simplified and streamlined approach for baseline marketing and distribution activities in respect of in-scope transactions with distributors resident in “covered jurisdictions”, provided the UK has a double tax treaty in effect with the covered jurisdiction.

Legal ReferenceSection 166 Taxation (International and Other Provisions) Act 2010 Section 172 Taxation (International and Other Provisions) Act 2010

The UK currently has an exemption from transfer pricing legislation for small or medium-sized enterprises. The definition of “small” and “medium-sized” enterprises in UK legislation aligns with the definition in the Annex to the EU Commission Recommendation 2003/361/EC of 6 May 2003.

The UK’s transfer pricing legislation does not allow unilateral corresponding adjustments in the absence of MAP.

Legal ReferenceSection 147 Taxation (International and Other Provisions) Act 2010

The statutory requirement is that “The profits and losses of the potentially advantaged person are to be calculated for tax purposes as if the arm’s length provision had been made or imposed instead of the actual provision”. This can be achieved through a year-end adjustment in the tax computations.

The majority of the UK’s treaties predate 2010 and so still include the pre-2010 version of Article 7, although the UK’s preference is to use the new version where possible. This means that currently fewer than 30 treaties contain the new Article 7.

• Article 7 as it read before 2010. (selected)
• Article 7 as it reads after 2010. (selected)
• Other (please provide additional details) (not selected)

Legal ReferenceConsultation on the reform of transfer pricing, permanent establishment and Diverted Profits Tax Draft legislation: permanent establishment

Under UK domestic legislation, profits attributable to a non-resident are to be determined under the ‘separate entity principle’ which is equivalent with the attribution requirements under old Article 7 of the OECD model treaty. The UK sees the AOA as informative for cases where the tax treaty contains the pre-2010 version of Article 7. Therefore, the UK would consider the application of the AOA in practice but we would look to the earlier guidance on any areas where Article 7 conflicts with the AOA.

Legal ReferenceDomestic law – CTA'09 /Part2/ Chapter 4 INTM267040 - Non-residents trading in the UK: profits of the PE: The separate entity principle and use of transfer pricing methodology Consultation on the reform of transfer pricing, permanent establishment and Diverted Profits Tax Draft legislation: permanent establishment

The UK legislation pre-dates both AOA reports and so technically does not follow either. However, if the treaty terms of how income or gains should be attributed to a permanent establishment differ from the UK domestic attribution provisions, then the treaty provisions would take precedence. The domestic attribution provisions are explicit that the non-resident’s profits chargeable in the UK should be determined under the ‘separate entity principle’. This attributes profits to the PE in the amount that it would have made if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions dealing wholly independently with the non-resident company of which it is a PE.

Legal ReferenceReform of transfer pricing, permanent establishment and Diverted Profits Tax Transfer Pricing – scope and documentation

In April 2025, the UK Government published a consultation on draft legislation to reform the UK’s transfer pricing, permanent establishment and Diverted Profits Tax rules. After considering consultation responses and making any necessary amendments, the UK government intends to legislate in Autumn 2025 with the possibility of entry into force in January 2026. Also in April 2025, the UK Government published a policy consultation on transfer pricing scope and documentation. Proposals included reforms to the Small and Medium Sized Enterprise Exemption and the introduction of a requirement for multinationals to report information on cross-border related party transactions to HMRC through an International Controlled Transactions Schedule (ICTS).