Fundamentals
Transfer Pricing UK
Transfer pricing UK refers to the domestic regime, mainly Part 4 of the Taxation Act 2010, requiring transactions between connected UK and overseas entities to be priced on an arm's length basis. HMRC enforces the rules through compliance checks, penalties and documentation duties, broadly aligned with OECD Guidelines.
UK transfer pricing law applies to most cross-border, and some domestic, transactions between connected parties, requiring pricing to reflect what independent businesses would agree in similar circumstances. Taxpayers must self-assess and adjust their profits upward where the terms diverge from arm's length.
HMRC reviews transfer pricing through its specialist Transfer Pricing Group and can open enquiries years after filing, so contemporaneous documentation is the key evidence of reasonable care. Medium and large groups outside the SME exemption face growing scrutiny over financing and intangible arrangements.
In practice
What matters when applying transfer pricing uk
- Based on Part 4 TIOPA 2010 and the arm's length principle
- Master File, Local File and Summary Audit Trail required for large groups
- HMRC's Transfer Pricing Group leads specialist enquiries
- SME exemption available subject to conditions
- Penalties apply for careless or deliberate non-compliance
Frequently asked
Common questions
Who does UK transfer pricing legislation apply to?+
UK transfer pricing legislation applies to companies and unincorporated businesses transacting with connected parties, whether overseas or, in certain cases, elsewhere in the UK. It mainly targets medium and large enterprises under EU-derived thresholds for staff, turnover and balance sheet size, though HMRC can extend scrutiny to smaller groups where anti-avoidance rules apply.
What documentation does HMRC expect for transfer pricing UK compliance?+
HMRC expects contemporaneous evidence supporting transfer pricing positions, including a Master File describing the group's global business, a Local File detailing UK intercompany transactions and benchmarking, and since April 2023 a Summary Audit Trail confirming how the Local File was produced. Smaller businesses without formal duties should still keep records showing reasonable care.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.