HMRC has published the Transfer Pricing and Diverted Profits Tax statistics for 2024-2025 on 11th March 2026. It shows an increasingly challenging environment:
- Enquiry: Yield from TP enquiries (i.e. the final closed value of TP assessments under enquiry) has gone up to c. £3.4 billion which is twice of the last year. This shows how aggressive HMRC has become when it comes to TP. Enquiry process is taking longer than before (increased to 41 months from 33 months).
- Dispute Resolution: Advance Pricing Agreements (APA) and Mutual Agreement Procedure (MAP) timelines have shortened which is a welcome news (c. 44 months and c. 25 months, respectively).
These are aligned with our recent experience of dealing with HMRC when we represent our clients.
Typically we are seeing the following intercompany transactions or arrangement are coming under radar:
- Intangible licensing
- Intangible migrationValuation
- Economic ownership of intangibles
- Profit split
- Cost sharing arrangements and cost contribution arrangements
- Contract R&D
- Financial transactions (including intra-group loans, cash pool) and thin capitalisation
- Management services
- Sales and marketing / distribution
Key takeaways from the HMRC statistics and our practical experience:
- HMRC enquiries are not just focussed on very large companies.
- It is absolutely essential to have a TP policy that is aligned with the substance of the global operations.
- The first line of defence in any enquiry is a defensible and contemporaneous TP documentation (e.g. Local file), supported by a robust functional analysis and economic analysis. It is a minimum to have to start a meaningful conversation with HMRC.
- A dated policy or tardy documentation is not going to help, rather will create a strategic disadvantage.
- HMRC’s enquiry process is increasingly becoming forensic and tedious, hence keeping all the records (including contemporaneous documentation, intercompany agreements, emails, board meetings notes, etc.) in place is crucial.
- APAs are helpful mechanism for getting tax certainty in multiple jurisdictions. But it is recommended to be primarily used in case of complex transactions / arrangements and where potential tax exposure is material.
- MAPs are increasingly utilised to mitigate double taxation and a reduced timeframe is encouraging for taxpayers in this increasingly complex global tax environment.
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