UK transfer pricing is moving towards real-time transparency, with HMRC increasingly expecting businesses to evidence their positions upfront rather than in response to an enquiry.

Recent developments highlight a clear direction of travel: compliance is becoming more data-driven, more immediate, and more closely aligned to how businesses operate in practice.

UK transfer pricing compliance: what’s changing in 2027

• The proposed International controlled transactions schedule (ICTS) brings significant elements of transfer pricing analysis into the tax return.
• OECD developments on intra-group services increase expectations around evidence while still requiring a high degree of judgement.
• HMRC is expanding the scope of profit diversion compliance facility (PDCF), making it relevant to a wider range of businesses.

ICTS: new UK transfer pricing filing obligations from 2027

The proposed ICTS represents a significant shift in UK transfer pricing compliance. Businesses will be required to report detailed information on their cross-border related party transactions in a standardised format alongside their corporation tax return.

ICTS will apply to groups within the scope of UK transfer pricing rules. Submission will be mandatory, and failures to file, or inaccuracies in the information provided, may result in penalties broadly aligned with existing Pillar Two and country-by-country reporting (CbCR) regimes. The first reporting periods for ICTS are expected to begin on or after 1 January 2027 meaning that the first filings will follow shortly thereafter.

For many groups, this goes beyond a simple reporting exercise. It requires a level of data consistency and analytical rigour that is not always embedded in current processes. Information that historically sat in documentation or emerged only during enquiries will now be visible at the point of filing. This means businesses should expect increased scrutiny on how their policies translate into financial outcomes.

The level of detail and structure envisaged in the ICTS is comparable to similar disclosures in other jurisdictions and, in some respects, exceeds them. This underlines the seriousness and pace with which HMRC is approaching this reform. As a result, this will often require closer alignment across tax, finance and operational data, as well as early identification of potential challenges.

OECD intra-group services guidance: implications for UK transfer pricing

The OECD’s consultation on intra-group services reinforces existing principles while increasing expectations around documentation and analysis. Areas such as the benefit test and pricing method selection remain highly fact-dependent.

For many groups, particularly those with centralised or digital models, this highlights the importance of accurately portraying services and aligning pricing approaches with commercial reality.

PDCF: no longer just for aggressive structures

HMRC is repositioning PDCF as a broader compliance tool. The latest guidance makes it clear that it is not limited to cases involving overt profit diversion. It extends to more routine situations where transfer pricing outcomes may no longer reflect the underlying business model. This marks a shift in focus from the mere existence of a policy to the strength of the underlying fact pattern. Policies that rely on standardised approaches or are not supported by robust evidence are increasingly exposed.

The decision to engage with the PDCF is therefore becoming more strategic. Early, proactive engagement can allow businesses to shape the narrative and manage risk, whereas deferring action increases the likelihood of formal enquiry.

Looking ahead: what’s next for UK transfer pricing

These developments point to a clear shift in the UK transfer pricing environment.

Compliance is becoming more immediate and data-led, with a greater emphasis on demonstrating clear alignment between policy and practice. This reflects HMRC’s broader direction, including a stronger focus on transfer pricing as a source of tax yield, alongside continued investment in data analytics capabilities and specialist resource.

The key question for businesses is no longer whether a transfer pricing policy exists, but if it will stand up to real-time scrutiny.

If you would like to discuss how these changes may affect your business or require support in assessing readiness or reviewing your current policies, please contact Simon Taylor or your usual RSM representative.

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