UK businesses: Are you ready for new transfer pricing documentation requirements?

If your company does business in the United Kingdom (UK) and is part of a multinational group, it’s time to review your UK transfer pricing documentation in light of new regulations.

Following the enactment of the Spring Finance Bill 2023, and the publication of The Transfer Pricing Records Regulations 2023 in July 2023, the UK implemented mandatory transfer pricing documentation requirements. The new requirements are aligned to the Organisation for Economic Co-operation and Development (OECD) model for documentation, developed under Base Erosion Profit Shifting (“BEPS”) Action 13.

The following is a summary of the new requirements:

• UK businesses that are part of multinational groups that meet the threshold requirement of at least €750 million worldwide in consolidated revenues must prepare transfer pricing documentation for the accounting years starting on or after April 1, 2023 (e.g., for businesses with a calendar year-end, the first year of application will be the year ending December 31, 2024).
• For UK businesses and multinational groups that are below the €750 million revenue threshold and have material related-party cross-border transactions, applying the new requirements on a voluntary basis is advised. This is reinforced by the new His Majesty’s Revenue and Customs (HMRC) guidance: “HMRC is of the view that an appropriate way to demonstrate that provisions between related parties adhere to the arm’s length principle is to prepare documentation in line with the OECD’s recommended approach even where the MNE [i.e., multinational enterprise] group test is not met.”
• While not required to be submitted to HMRC with the tax return or require any form of time stamp, the UK transfer pricing documentation must be maintained and made available to HMRC within 30 days upon request. Failure to comply will result in the presumption of carelessness if an inaccuracy is found in the tax return.

Tougher enforcement by HMRC of penalties for non-compliance under the new regulations is expected. Impacted taxpayers should review and assess if their current UK transfer pricing meets the new documentation requirements.

Contact Kaufman Rossin’s international tax team for assistance with evaluating your existing transfer pricing in light of the changes.