Use this skill whenever asked about UK transfer pricing rules, documentation, or HMRC compliance. Trigger on phrases like "transfer pricing UK", "UK TP documentation", "HMRC transfer pricing", "arm's length UK", "master file UK", "local file UK", "CbCR UK", "APA HMRC", "TIOPA Part 4", "Transfer Pricing Records Regulations 2023", or any question about intercompany pricing compliance for UK entities.
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Confirm the participation (control) condition
Establish whether the dealing is between two persons where one controls the other or both are under common control. UK transfer pricing only bites on a provision made or imposed between connected or controlled parties, so a genuinely third-party transaction is out of scope.
Watch for: Part 4 applies where a provision between controlled parties differs from the provision independent enterprises would have made and that difference gives a UK tax advantage.
TIOPA 2010 Part 4
Test the SME and medium-sized exemptions
Size the UK party at group level and run the SME size tests (turnover, employees, and assets). If SME, the entity is generally outside Part 4 adjustments. If medium-sized, check the exemption but note it drops away where the counterparty sits in a non-qualifying (tax haven) territory. Flag that Diverted Profits Tax can still apply either way.
Watch for: An SME meeting all three size tests is exempt from Part 4 adjustment; a medium-sized entity may be exempt unless the counterparty is in a non-qualifying territory. The exemption does not switch off Diverted Profits Tax.
TIOPA 2010 s.166
Every figure is drawn from this Tax Guide and cited to its source.
Legislation
TIOPA 2010 Part 4; SI 2023/818TIOPA 2010
Master File
OECD format; available within 30 days of HMRC requestSI 2023/818
Local File
OECD format; available within 30 daysSI 2023/818
CbCR threshold
Group revenue ≥ EUR 750mTIOPA 2010 s.286
CbCR filing deadline
12 months after end of reporting periodTIOPA 2010
Criteria
Turnover < £10m AND < 50 employees AND assets < £5mTIOPA s.166
Medium exemption
< 250 employees, turnover < £36m or assets < £18m (unless tax haven)TIOPA
Failure to keep TP records
Up to £3,000 per failure per return periodFA 2007 Sch.24
Careless inaccuracy
0-30% of tax
Year applicability: Rules in this skill apply across 2024-25, 2025-26, and 2026-27 unless a specific section flags a year-dated change. The pack is read alongside the rate-bearing skills (
uk-income-tax-sa100,uk-national-insurance,uk-dividends, etc.) which carry full 3-year tables.
Reviewed against the cited tax authorities by James Power on 2026-06-03. Items flagged for further clarification are tracked separately and excluded here. This block is generated from verified
skill_facts— edit the facts, not the prose.
Section 1 -- Quick Reference
| Field | Value |
|---|---|
| Country | United Kingdom |
| Tax authority | HM Revenue & Customs (HMRC) |
| Key TP legislation | Part 4, Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) |
| Documentation regulations | Transfer Pricing Records Regulations 2023 (SI 2023/818) |
| OECD member? | Yes |
| BEPS signatory? | Yes |
| Effective date (documentation regs) | Corporation Tax: accounting periods beginning on/after 1 April 2023; Income Tax: from 2024-25 |
| Currency | GBP |
| Documentation language | English |
| Skill version | 1.0 |
2.1 Master File
| Item | Detail |
|---|---|
| Required? | Yes, for in-scope UK entities (MNEs meeting CbCR threshold with material controlled transactions) |
| Format | OECD Annex I to Chapter V of TP Guidelines (2022 edition) |
| Filing | Not filed; must be available on HMRC request within 30 days |
| Threshold | Part of a multinational group meeting the EUR 750m CbCR threshold |
2.2 Local File
| Item | Detail |
|---|---|
| Required? | Yes, for in-scope UK entities with material controlled transactions |
| Format | OECD Annex II to Chapter V of TP Guidelines (2022 edition) |
| Filing | Not filed; available on HMRC request within 30 days |
| Supplementary | Summary Audit Trail (SAT) -- subject to further consultation |
Even if exempt from specified records, general TP documentation must still demonstrate arm's length compliance.
2.4 Country-by-Country Report (CbCR)
| Item | Detail |
|---|---|
| Threshold | Consolidated group revenue ≥ EUR 750 million |
| Filing deadline | 12 months after end of reporting period |
| Filing method | Electronic (XML), via HMRC |
| Notification | Required annually |
3.2 Accepted Methods
| Method | Accepted |
|---|---|
| Comparable Uncontrolled Price (CUP) | Yes |
| Resale Price Method (RPM) | Yes |
| Cost Plus Method (CPM) | Yes |
| Transactional Net Margin Method (TNMM) | Yes |
| Profit Split Method (PSM) | Yes |
No strict hierarchy; most appropriate method based on facts and circumstances. HMRC follows OECD Guidelines.
Section 4 -- Filing Obligations
| Obligation | Detail |
|---|---|
| Specified TP records (Master/Local File) | Maintain; provide within 30 days of HMRC request |
| TP return/disclosure | No separate TP return; self-assessment within CT600 |
| CT600 declaration | Confirm arm's length compliance |
| CbCR filing | Annual electronic filing |
| APA annual report | Filed with company tax return |
Section 5 -- Deadlines
| Item | Deadline |
|---|---|
| Documentation preparation | Before filing the relevant tax return |
| Documentation provision to HMRC | Within 30 days of information notice |
| Corporate tax return (CT600) | 12 months after end of accounting period |
| CbCR filing | 12 months after end of reporting period |
| CbCR notification | Within 12 months of end of reporting period |
Section 6 -- Penalties
| Offence | Penalty |
|---|---|
| Failure to keep/preserve specified TP records | Up to £3,000 per failure per return period |
| Tax-geared penalty (inaccuracy in return) | Careless: 0-30%; Deliberate: 20-70%; Deliberate and concealed: 30-100% |
| Failure to notify CbCR | Standard information penalties |
| Late CbCR filing | Standard penalties for late returns |
| Failure to provide information on request (general) | £300 initial + £60/day ongoing |
Section 7 -- Advance Pricing Agreements (APA)
| Item | Detail |
|---|---|
| Availability | Yes |
| Types | Unilateral, Bilateral, Multilateral |
| Governing legislation | Sections 218-230, TIOPA 2010 |
| Application | Expression of Interest (EOI) to BAI Transfer Pricing Team |
| Fees | No fees charged by HMRC |
| Typical duration | 3-5 years prospective (rollback possible) |
| Annual reporting | APA report filed with CT return |
| Process timeline | Unilateral: 12-18 months; Bilateral: 18-36 months |
| Competent Authority | HMRC BAI Transfer Pricing Team |
The UK does not have formal statutory safe harbour rules for transfer pricing.
However, several practical reliefs exist:
Section 8 -- Safe Harbours (practical reliefs)
| Area | Detail |
|---|---|
| SME exemption | Entities with turnover < £10m, < 50 employees, assets < £5m: exempt from Part 4 adjustment |
| Medium-sized exemption | May apply for medium companies (< 250 employees, turnover < £36m or assets < £18m) unless transaction is with a tax haven |
| Low-value services | HMRC accepts OECD simplified approach (cost-plus 5%) for qualifying services |
| Materiality | HMRC applies practical materiality in audit selection; immaterial transactions unlikely to be challenged |
| UK-to-UK exemption | Domestic related-party transactions exempt from specified TP record requirements |
The SME and medium-sized company exemptions from Part 4 adjustments significantly narrow the scope of UK TP rules in practice. Medium-sized companies are exempt unless the counterparty is in a non-qualifying territory (tax haven).
Companies within the SME/medium exemption may still be exposed to the Diverted Profits Tax (25% rate) if profits are diverted from the UK through arrangements lacking economic substance.
Section 9 -- Recent Developments
| Date | Development |
|---|---|
| August 2023 | Transfer Pricing Records Regulations 2023 (SI 2023/818) published |
| April 2023 | Specified TP records effective for CT periods beginning on/after this date |
| 2024-25 | Specified TP records effective for Income Tax purposes |
| Ongoing | Summary Audit Trail (SAT) under further consultation |
| 2024 | BEPS Pillar Two (GloBE) implemented via Finance Act 2023 for periods from 31 Dec 2023 |
| Ongoing | OECD Pillar One Amount B: UK monitoring but not yet adopted |
| 2024 | Transfer pricing mismatch provisions under review |
Section 10 -- Interaction with Other Skills
| Related skill | Interaction |
|---|---|
| uk-corporation-tax | TP adjustments increase taxable profits; interaction with loss utilisation |
| uk-vat | TP adjustments may affect customs value and VAT on imports |
| uk-bookkeeping | Related-party disclosures in financial statements must align with TP positions |
| Diverted Profits Tax (DPT) | 25% rate applies where profits diverted from UK; TP documentation relevant to DPT risk |
| CbCR | Global risk assessment tool; feeds HMRC compliance approach |
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Review status
Accountant-reviewed
Reviewed by a named licensed practitioner against the stated sources, as general reference material.
Accountant-reviewed
Reviewed by James Power · 3 June 2026
A named accountant reviewed this complete Guide version within the stated scope. It is not a guarantee.
View review record →Other United Kingdom computations in the OpenAccountants Tax Library.
Identify and map the controlled transactions
List every material controlled transaction (goods, services, financing, IP, cost contribution), both cross-border and domestic. Mark UK-to-UK transactions, which are exempt from the specified records requirement but still have to be priced at arm's length.
Watch for: The rules reach material controlled transactions; UK-to-UK domestic related-party transactions are exempt from specified TP records but not from the arm's length standard.
TIOPA 2010 Part 4
Apply the arm's length principle and select the method
Compare the controlled conditions with those independent parties would have agreed, then pick the most appropriate method for each transaction (CUP, RPM, CPM, TNMM, or PSM) on the facts. There is no fixed hierarchy; HMRC follows the OECD Guidelines.
Watch for: Where controlled conditions differ from arm's length, profits may be adjusted to the arm's length result, using the most appropriate method for the transaction.
Section 147 TIOPA 2010; OECD TP Guidelines
Benchmark to an arm's length range
Build the economic analysis: search for comparables, set the tested party and profit level indicator, and derive the arm's length range. For qualifying low-value intra-group services, the OECD simplified cost-plus safe harbour markup may be used instead of a full benchmarking study.
Watch for: Support the selected method with a comparables or economic analysis; qualifying low-value intra-group services may use the OECD simplified cost-plus markup.
OECD TP Guidelines
Prepare the TP documentation to the required standard
Where the group meets the CbCR revenue threshold and the UK entity has material controlled transactions, prepare an OECD-format master file and local file and keep them ready to provide to HMRC within the specified window (they are held, not filed). Confirm any CbCR filing and annual notification obligations for in-scope groups.
Watch for: In-scope UK entities must maintain specified TP records (master file and local file) and provide them to HMRC within the specified time of a request; the master/local file obligation is tied to the CbCR group-revenue threshold.
SI 2023/818 (Transfer Pricing Records Regulations 2023)
Make the self-assessment adjustment one way only
If the pricing sits outside the arm's length range, increase UK taxable profits by the adjustment in the CT600 self-assessment. Do not book a downward (profit-reducing) adjustment; the taxpayer cannot self-adjust downward without a specific claim, and there is no separate TP return.
Watch for: The arm's length adjustment runs one way: it increases UK profits on self-assessment, and any compensating downward adjustment requires a claim rather than an automatic entry.
TIOPA 2010 Part 4
Assess penalty exposure and deliver the working paper
Set out the penalty exposure (a per-failure penalty for not keeping specified records, plus tax-geared inaccuracy penalties graded by behaviour) so the client sees the cost of thin documentation. Assemble the scope test, method, benchmark, adjustment, and documentation status into one working paper, then offer the review.
Watch for: Inadequate records carry a per-failure penalty, and an inaccuracy in the return carries a tax-geared penalty graded from careless up to deliberate and concealed.
FA 2007 Sch.24
What James checks before signing off
Ready to work through your own numbers? Add this Guide to your AI and it takes it from here, then routes the finished paper for an accountant to review.
Add to your AIDeliberate inaccuracy
20-70% of taxFA 2007 Sch.24
Deliberate and concealed
30-100% of taxFA 2007 Sch.24
HMRC fees
No fees chargedTIOPA ss.218-230
Duration
3-5 years prospective (rollback possible)TIOPA
Low-value services safe harbour
Cost-plus 5% acceptedOECD Guidelines
Section 1 -- Quick Reference
| Field | Value | |---|---| | Country | United Kingdom | | Tax authority | HM Revenue & Customs (HMRC) | | Key TP legislation | Part 4, Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) | | Documentation regulations | Transfer Pricing Records Regulations 2023 (SI 2023/818) | | OECD member? | Yes | | BEPS signatory? | Yes | | Effective date (documentation regs) | Corporation Tax: accounting periods beginning on/after 1 April 2023; Income Tax: from 2024-25 | | Currency | GBP | | Documentation language | English | | Skill version | 1.0 |
2.1 Master File
| Item | Detail | |---|---| | Required? | Yes, for in-scope UK entities (MNEs meeting CbCR threshold with material controlled transactions) | | Format | OECD Annex I to Chapter V of TP Guidelines (2022 edition) | | Filing | Not filed; must be available on HMRC request within 30 days | | Threshold | Part of a multinational group meeting the EUR 750m CbCR threshold |
2.2 Local File
| Item | Detail | |---|---| | Required? | Yes, for in-scope UK entities with material controlled transactions | | Format | OECD Annex II to Chapter V of TP Guidelines (2022 edition) | | Filing | Not filed; available on HMRC request within 30 days | | Supplementary | Summary Audit Trail (SAT) -- subject to further consultation |
2.4 Country-by-Country Report (CbCR)
| Item | Detail | |---|---| | Threshold | Consolidated group revenue ≥ EUR 750 million | | Filing deadline | 12 months after end of reporting period | | Filing method | Electronic (XML), via HMRC | | Notification | Required annually |
Arm's length standard
Section 147 TIOPA 2010: where conditions differ from those that would have been made between independent enterprises, profits may be adjusted to reflect arm's length conditions.Section 147 TIOPA 2010
3.2 Accepted Methods
| Method | Accepted | |---|---| | Comparable Uncontrolled Price (CUP) | Yes | | Resale Price Method (RPM) | Yes | | Cost Plus Method (CPM) | Yes | | Transactional Net Margin Method (TNMM) | Yes | | Profit Split Method (PSM) | Yes |
Scope
Applies to cross-border and domestic transactions; Exemption for SMEs (from Part 4 adjustment): turnover < £10m and < 50 employees and assets < £5m; One-way application: HMRC can only adjust upwards (taxpayer cannot self-adjust downwards without claim)
Section 4 -- Filing Obligations
| Obligation | Detail | |---|---| | Specified TP records (Master/Local File) | Maintain; provide within 30 days of HMRC request | | TP return/disclosure | No separate TP return; self-assessment within CT600 | | CT600 declaration | Confirm arm's length compliance | | CbCR filing | Annual electronic filing | | APA annual report | Filed with company tax return |
Section 5 -- Deadlines
| Item | Deadline | |---|---| | Documentation preparation | Before filing the relevant tax return | | Documentation provision to HMRC | Within 30 days of information notice | | Corporate tax return (CT600) | 12 months after end of accounting period | | CbCR filing | 12 months after end of reporting period | | CbCR notification | Within 12 months of end of reporting period |
Section 6 -- Penalties
| Offence | Penalty | |---|---| | Failure to keep/preserve specified TP records | Up to £3,000 per failure per return period | | Tax-geared penalty (inaccuracy in return) | Careless: 0-30%; Deliberate: 20-70%; Deliberate and concealed: 30-100% | | Failure to notify CbCR | Standard information penalties | | Late CbCR filing | Standard penalties for late returns | | Failure to provide information on request (general) | £300 initial + £60/day ongoing |
Section 7 -- Advance Pricing Agreements (APA)
| Item | Detail | |---|---| | Availability | Yes | | Types | Unilateral, Bilateral, Multilateral | | Governing legislation | Sections 218-230, TIOPA 2010 | | Application | Expression of Interest (EOI) to BAI Transfer Pricing Team | | Fees | No fees charged by HMRC | | Typical duration | 3-5 years prospective (rollback possible) | | Annual reporting | APA report filed with CT return | | Process timeline | Unilateral: 12-18 months; Bilateral: 18-36 months | | Competent Authority | HMRC BAI Transfer Pricing Team |
Section 8 -- Safe Harbours (practical reliefs)
| Area | Detail | |---|---| | SME exemption | Entities with turnover < £10m, < 50 employees, assets < £5m: exempt from Part 4 adjustment | | Medium-sized exemption | May apply for medium companies (< 250 employees, turnover < £36m or assets < £18m) unless transaction is with a tax haven | | Low-value services | HMRC accepts OECD simplified approach (cost-plus 5%) for qualifying services | | Materiality | HMRC applies practical materiality in audit selection; immaterial transactions unlikely to be challenged | | UK-to-UK exemption | Domestic related-party transactions exempt from specified TP record requirements |
Section 9 -- Recent Developments
| Date | Development | |---|---| | August 2023 | Transfer Pricing Records Regulations 2023 (SI 2023/818) published | | April 2023 | Specified TP records effective for CT periods beginning on/after this date | | 2024-25 | Specified TP records effective for Income Tax purposes | | Ongoing | Summary Audit Trail (SAT) under further consultation | | 2024 | BEPS Pillar Two (GloBE) implemented via Finance Act 2023 for periods from 31 Dec 2023 | | Ongoing | OECD Pillar One Amount B: UK monitoring but not yet adopted | | 2024 | Transfer pricing mismatch provisions under review |
Section 10 -- Interaction with Other Skills
| Related skill | Interaction | |---|---| | uk-corporation-tax | TP adjustments increase taxable profits; interaction with loss utilisation | | uk-vat | TP adjustments may affect customs value and VAT on imports | | uk-bookkeeping | Related-party disclosures in financial statements must align with TP positions | | Diverted Profits Tax (DPT) | 25% rate applies where profits diverted from UK; TP documentation relevant to DPT risk | | CbCR | Global risk assessment tool; feeds HMRC compliance approach |
Rendered from the canonical facts model · method attested Jun 3, 2026 (covers the method, not the currency of individual figures). General reference only — confirm with a qualified professional before acting.
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