HMRC transfer pricing consultation outcome

Earlier this year HMRC launched a consultation seeking views on options for updating transfer pricing documentation requirements. We, together with 38 others, responded to this consultation, which focused on two areas of transfer pricing documentation. HMRC released the summary of responses on 30 November 2021.

The consultation, which ran from 23 March to 1 June 2021, considered:

  • the introduction of a requirement for affected UK groups to keep, and produce upon request, specific documentation to articulate and support the transfer pricing positions taken in their tax returns as described in the OECD (Organisation for Economic Co-operation and Development) standardised approach; and
  • whether to require certain groups to include with their annual tax return, details about material cross border transactions with connected parties (“International Dealings Schedules”).

We are pleased to say that HMRC have taken a pragmatic and common-sense approach to the changes due to come into effect from April 2023. These changes should only impact groups that are in the scope of country by country reporting (generally those with consolidated revenue in excess of €750 million).  Below, we have also explained what this means for small and medium sized entities.

What does this mean for companies within the scope of country by country reporting?

The main points are:

  • Transfer Pricing master and local documentation will need to be maintained and provided on request.
  • The proposal for International Dealings Schedules (IDS) has been put on hold, but these businesses will have to produce a “summary audit trail” – a new document outlining key intragroup transactions, their values and summarising the work that companies have carried out to reach the conclusions within the master and local files. HMRC have stated that they will use these documents to assess the transfer pricing risk in the first instance.
  • Upon request from HMRC, these businesses will have 30 days to produce master and local files. This will mean that transfer pricing documentation will need to be completed fully prior to computations being submitted.
  • HMRC have confirmed that only material transactions and only UK to UK transactions where a material tax risk arises need to be included in the documentation.
  • HMRC are going to update their guidance on transfer pricing documentation – this should give further information on what documentation needs to be kept and in what format. It is very likely that this will continue to follow the OECD transfer pricing guidelines and provide detailed examples.

What does this mean for small and medium entities (SMEs)?

The UK is still maintaining its SME transfer pricing exemption, generally meaning that any group of UK-only companies do not need to follow the UK and OECD transfer pricing guidelines on the basis that the Group has either less than 250 FTE (full time equivalent) employees; or annual turnover or gross balance sheet assets less than €50 million and €43 million respectively.

However, if your group has a company outwith the UK and in a territory that does not have a similar exemption (e.g. the United States) you will need to adhere to the transfer pricing rules in that other territory and by default will have transfer pricing adjustments in the UK too.

Get in touch

Our specialist International Tax team is here to help. If you would like to discuss these changes in more detail or transfer pricing in general, please feel free to reach out to me by e-mail at

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