Key UK Transfer Pricing Changes for 2026

The UK is no longer a jurisdiction that many groups can treat as low-risk from a transfer pricing perspective. From 1 January 2026, the UK introduced a reform package that broadens the scope of transfer pricing, changes how domestic transactions are treated, increases scrutiny of financing and guarantees, sharpens the role of OECD guidance, and tightens the valuation standard for cross-border IP. A new transaction reporting requirement, the ICTS, is also expected to take effect from 1 January 2027. For finance and tax teams, the message is simple: review your scope, your data, and your support now, before HMRC does it for you.

1. More relationships may now fall within transfer pricing

One of the biggest changes is the broader participation condition. In practice, UK transfer pricing can now apply even where formal legal control is not obvious, if one party has enough practical influence over another. That matters for groups with minority holdings, governance rights, strategic dependency, or other arrangements that previously sat outside the rules.

What to review: Edge-case related-party relationships, especially where influence exists without clear majority ownership.

2. UK-UK transactions may be easier, but only if the exemption really applies

The new UK-UK exemption could reduce compliance work for qualifying domestic related-party transactions. That is helpful, but it is not automatic. Groups still need to assess whether the conditions are met, whether the transaction is genuinely tax neutral, and whether any exclusions or mismatches keep the arrangement in scope.

What to review: Domestic financing, guarantees, and other UK-UK dealings where the exemption may be available but has not been formally scoped.

3. Financing and guarantees are now a clear challenge area

The UK has moved more closely into line with OECD guidance on financial transactions, and HMRC is expected to look more closely at debt capacity, guarantee pricing, and the distinction between explicit guarantees and general group support. In practical terms, weak debt-capacity analysis, thin support for guarantee fees, or inconsistent treatment across borrower and guarantor positions will be harder to defend.

What to review: Intercompany loans, guarantee fee policies, treasury structures, and any UK entity with material financing flows.

4. Older technical positions may need refreshing

The reforms also make the OECD interpretative rule more explicit. UK transfer pricing is now expected to be interpreted consistently with current OECD materials unless the UK has taken a different position. That means older memos, legacy analyses, and positions built on stale OECD support may no longer be enough, especially in contentious areas.

What to review: Precedent files, benchmark support, and technical positions that have not been refreshed for the current OECD guidance.

5. HMRC may move faster once issues arise

The repeal of Commissioners’ sanction does not change how groups should price transactions, but it does streamline HMRC’s internal process before making certain transfer pricing determinations. The practical consequence is straightforward: businesses should expect less procedural delay before formal action.

What to review: Whether key transfer pricing positions are supported before an enquiry starts, not during it.

6. IP valuations will need stronger arm’s-length support

For cross-border related-party transfers and licences of intangible fixed assets, the UK now uses a clearer arm’s-length valuation standard. That creates a tighter link between transfer pricing, valuation, and legal structuring. This matters especially for groups with software, brand, technology, or broader IP migration activity.

What to review: Current and planned IP transfers, licence arrangements, and whether valuation reports are framed clearly around arm’s-length support.

7. ICTS means data readiness matters now, not in 2027

The International Controlled Transactions Schedule is expected to apply for accounting periods beginning on or after 1 January 2027. Its purpose is to give HMRC more standardised, transaction-level information on cross-border related-party dealings. The real challenge is not just the future filing requirement. It is whether businesses can actually collect, validate, and reconcile the underlying data well enough to comply.

What to review: Transaction-level audit trail, data collection processes, and whether current TP documentation can map into structured reporting.

8. The medium-sized business reprieve does not remove wider risk

The government decided not to proceed, for now, with removing the medium-sized business exemption through this reform process. That gives some relief to mid-market groups. But it does not remove the wider message of the reforms: the UK is becoming more structured, more transparent, and more scrutiny-driven.

What to review: Whether exemption status still applies, and whether overseas requirements or audit risk still make stronger support necessary.

9. A wider enforcement shift is also taking shape

Alongside the legislative changes, HMRC’s latest statistics reinforce the direction of travel. The UK brief highlights TP yield of £3.387bn for 2024-25, with 26 APAs agreed and 115 MAP cases resolved. That is not just a data point. It is a signal that transfer pricing remains a live, well-resourced focus area for HMRC.

What to review: Whether high-value financing, profit allocation, and weakly supported positions could attract more attention than they would have in the past.

10. A short note on DPT and UTPP

A related development is the replacement of Diverted Profits Tax with an Unassessed Transfer Pricing Profits charge within the mainstream corporation tax framework. For some groups, that may broaden the relevance of anti-diversion rules and bring older DPT-style risk questions back into focus through a more integrated transfer pricing lens. This is not the first issue most businesses should review, but it adds to the broader picture of a more assertive UK environment.

What to review: If the group has previously considered DPT exposure, low-tax structuring risk, or material profit diversion questions, revisit whether the new framework changes the risk profile.

Final takeaway

The UK transfer pricing story is no longer just about minimal compliance. It is about scope, audit trail, financing discipline, IP defensibility, and readiness for more granular reporting. For businesses with UK operations, the right response is to review those areas now and fix the weak points before they become visible in an enquiry or filing cycle for HMRC.

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