Transfer pricing rules meaning

Stop Press: Section 49 together with Schedule 7 to the Finance Act 2026 revises the UK’s domestic rules concerning UK permanent establishments of overseas, non-UK companies, applying for accounting periods (for corporation tax) or tax years (for income tax) that start on or after 1 January 2026. These measures update both the meaning of a UK permanent establishment and the framework for attributing profits to such establishments so as, in each instance, to align them more closely with the OECD Model Tax Convention. This ensures the domestic position is more consistent with internationally accepted norms. Separately, Section 46 and Schedule 5 to the Finance Act 2026 scrap the DPT regime and introduce the ‘unassessed transfer pricing profits’ (UTPP) provisions, effective for accounting periods commencing on or after 1 January 2026. HMRC has published a new chapter in the International Manual setting out guidance on the UTPP rules at INTM489100. Additional practical guidance is provided there. For further detail on these updates, see News Analysis: Budget...

FORTHCOMING CHANGE relating to UK transfer pricing legislation Finance Bill 2026 (as introduced) outlines a suite of amendments to the UK’s transfer pricing framework. Once enacted, and applying to accounting periods starting on or after 1 January 2026, the package will, amongst other measures, switch off UK‑to‑UK transfer pricing—subject to defined exclusions designed to prevent tax arbitrage—adjust the participation condition, confirm that the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines function as interpretative aids, and recast aspects of the rules for financial transactions so that the UK approach is brought into closer alignment with the OECD Transfer Pricing Guidelines. In parallel, the government announced at Budget 2025 that it will move ahead with a new obligation for in‑scope multinational groups to report, each year, information on cross‑border related party dealings. This reporting applies for accounting periods beginning on or after 1 January 2027, and the detailed technical rules for the ‘International Controlled Transactions Schedule’ (ICTS) are expected to be released in spring 2026...

In this issue: Companies and corporation tax Stamp taxes VAT Individuals and income tax Taxes management and litigation Employment taxes Budget and Finance Bills Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax Court of Appeal decides interest on intra-group loans not restricted under transfer pricing rules but debits disallowed under unallowable purpose rule (BlackRock Holdco 5, LLC v HMRC) BlackRock Holdco 5, LLC v HMRC [2024] EWCA Civ 330 considers whether, for UK tax purposes, interest on intra‑group borrowing put in place to help fund a commercial acquisition is deductible. Two principal points were before the Court of Appeal: the transfer pricing analysis and the loan relationships unallowable purpose question. On the transfer pricing limb, the Court of Appeal allowed the taxpayer’s appeal. As a result, deductions for interest on the intra‑group loans were not curtailed by the transfer...

In this issue: Brexit headlines Brexit SIs Post-Brexit transition guidance Constitutional and administrative law Equality and human rights Subsidy control and State aid Public procurement Management and strategic planning Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Brexit headlines ESC publishes fifth Report of Session 2023–2024 The European Scrutiny Committee (ESC) has released its fifth Report for Session 2023–2024, covering items considered at that meeting too. At its 13 December 2023 meeting, the ESC reviewed Windsor Framework material from the Department for Environment, Food & Rural Affairs (DEFRA) on formaldehyde and legislative changes to EU Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) rules. The Committee also examined Trade and Cooperation Agreement papers from the Foreign, Commonwealth & Development Office (FCDO) concerning electric accumulators and electrified vehicles. See: LNB News 14/02/2024 27. Brexit SIs Railways (Revocation and Consequential Provision) Regulations...

Kwik-Fit Group Ltd and others v HMRC [2024] EWCA Civ 434 Background The appellants participated in an intra-group debt reorganisation in which: loan receivables due from the appellants were transferred to an intermediate holding company, Speedy 1 Ltd (Speedy 1) (the Assigned Loans) new loan receivables were put in place in Speedy 1’s favour (the New Loans) the interest rates on the Assigned Loans, together with a loan already owed by one appellant to Speedy 1 (the Pre-existing Loan), were increased to match the arm’s length rate prevailing at that time At that time, Speedy 1 held around £48m of non-trading loan relationship deficits (NTLRDs) carried forward from earlier periods. Under the loss relief rules then in force, those NTLRDs were effectively trapped within Speedy 1 and could not be utilised by other members of the group...

Stop Press : From accounting periods starting on or after 1 January 2026, the Diverted Profits Tax is superseded by the unassessed transfer pricing profits rules. This Practice Note, alongside Transactions in UK land—tax rules, examines the anti-avoidance provisions aimed at countering attempts to sidestep tax on income, profits or gains connected with arrangements concerning, or trades of dealing in, land. The main anti-avoidance measure seeks to treat gains of a capital character realised on the disposal of land as income, bringing them within income tax or corporation tax. Further detail appears in Practice Note: Transactions in UK land—tax rules. From 5 July 2016 these rules superseded and expanded the former transactions in land rules (for information on prior rules, see Practice Note: Real estate—anti-avoidance: disposals of land and taxing capital gains as income (pre 5 July 2016) [Archived])...

FORTHCOMING CHANGE relating to UK transfer pricing: At Budget 2025, the government confirmed that it intends to move ahead with a new duty on in‑scope multinationals to submit annual information regarding cross‑border related party transactions and dealings for accounting periods starting on or after 1 January 2027. The detailed rules for the new ‘International Controlled Transactions Schedule’ (ICTS) are expected to be formally issued for technical consultation during spring 2026. A consultation on this measure ran from April through to July 2025. See News Analysis: Budget 2025—Tax analysis—International. This Practice Note reviews the UK transfer pricing rules as they apply to chargeable periods (referred to in this Practice Note for ease and convenience as ‘accounting periods’) commencing before 1 January 2026. Note that the Finance Act 2026 introduced a range of reforms to the UK’s transfer pricing regime, most of which apply for accounting periods beginning on or after 1 January 2026, subject to specified transitional provisions. For wider background on transfer pricing, see Practice Notes: Transfer pricing—what is...

In October 2021, countries participating in the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) (the OECD Inclusive Framework) endorsed a ‘two-pillar’ package addressing the tax issues stemming from the digitalisation of the global economy. The two pillars constitute an ambitious effort to reform and modernise international tax rules that allocate where, and how, profits are taxed. Pillar One is chiefly (though not exclusively) aimed at the digital economy: ‘a world where enterprises can effectively be heavily involved in the economic life of different jurisdictions without any significant physical presence and where new and often intangible value drivers increasingly come to the fore’. Pillar One introduces two elements: a new taxing right that stretches beyond traditional tax nexus rules anchored in physical location (Amount A) a standardised methodology for transfer pricing baseline marketing and distribution activities between related parties (Amount B). This Practice Note provides a high-level summary of: the tax...