International Controlled Transactions Schedule (ICTS): what businesses need to know

The introduction of the International Controlled Transactions Schedule (ICTS) is a significant development for UK Transfer Pricing (TP) compliance and will provide HMRC with structured, transaction level data visibility for the first time and change how it assesses risk.

HMRC has published a technical consultation on the detailed design of the ICTS, including draft regulations, a draft notice and a reporting template. The HMRC consultation runs to 31 July 2026 and provides the clearest view to date of how the new regime will operate.

What is the International Controlled Transactions Schedule (ICTS)?

The ICTS is a new annual reporting requirement that will be filed alongside the corporation tax return. The ICTS requires entities within scope to provide standardised data on cross-border related-party transactions and dealings with their overseas Permanent Establishment (PE). HMRC will use this information to perform automated risk assessments and identify cases for enquiry.

The scope of the reporting rules is deliberately wide. It applies to:

• UK companies within the transfer pricing rules
• UK companies with overseas PEs
• Non-UK companies with a UK PE

The regime extends beyond traditional intercompany reporting arrangements as both legal transactions and notional dealings with PE must be reported.

When does the ICTS need to be filed?

The ICTS is expected to apply for accounting periods beginning on or after 1 January 2027, with first filings due in 2028 alongside the corporation tax return. The requirement will apply annually and is completed on an entity-by-entity basis.

Who needs to file an ICTS?

The reporting requirement is subject to thresholds aimed at excluding lower risk entities.

There is no reporting requirement for:

• UK companies without overseas PEs fully covered by the small and medium sized enterprise (SME) exemption from UK TP rules
• UK-only groups

For other businesses, there is no reporting requirement if each individual transaction type falls below materiality threshold tests such that it has no reportable transactions.

All remaining businesses will need to file if:

• total (aggregate, gross sum of all transaction types) related party transactions exceed a materiality threshold of £1 million)
• the company has any related party transactions with “non qualifying territories”

For example, UK SMEs that are within the UK TP rules because they have related party transactions with “non qualifying territories” would have to file, unless each of their individual transaction types fall below materiality threshold tests.

There is also a specific rule for non-UK companies that are subject to UK tax by virtue of carrying out a UK property business. Such companies are within the remit of the ICTS regulations and their transactions are not excluded under the carve-out for UK-UK arrangements.

The materiality tests allow companies to use relatively easily available data as a gateway test before reconciling values with transfer pricing policies.

What transactions need to be included in ICTS?

Where an ICTS filing is required, the entity must report its so called “specified international controlled transactions”. These include cross border related party transactions and PE dealings, including arrangements between a head office and its branch.

Transactions are grouped and tested against materiality thresholds. Only aggregated categories that exceed £1 million for groups within Country-by-Country Reporting (CbCR), or £100,000 for other entities, are included. Transactions below these levels are excluded.

Financing transactions are subject to an additional layer of thresholds. Loan relationships and deemed loan relationships are first tested against the £1 million or £100,000 thresholds described above. In addition, a separate threshold applies based on the size of the underlying loan, set at £50 million for CbCR groups and £5 million for other entities.

Certain transactions are excluded entirely, including those covered by an in-force APA, UK to UK transactions and items such as exempt dividends.

Can we aggregate transactions for simplicity?

HMRC will allow aggregation of common transactions to reduce the administrative burden of reporting.

Transactions may be grouped together in the ICTS where a business applies a single policy across a number of similar arrangements. Those flows can generally be reported as a single category but they must be priced consistently, including the method applied, the profit metric used and use the same comparability analysis/benchmark. A good example might be the provision of services to multiple group entities on a cost-plus basis using one benchmark. In that case, aggregation will usually be appropriate.

Transactions will need to be separately reported where they differ in pricing method, functional profile, economic characteristics or benchmarking approach.

For aggregated transactions, the file requires some limited disclosure of the most material counterparties within each category.

Are there special rules for financial services businesses?

HMRC will allow transactions to be reported on a business line basis rather than at an individual transaction level for certain entities operating in the financial services sector. This enables aggregation by reference to how activities are managed internally, such as by trading desk, product line or portfolio.

What data needs to be included in ICTS?

The draft ICTS template combines core financial data with targeted transfer pricing policy information.

At a basic level, entities are required to report the counterparty, jurisdiction, transaction type and the total income and expenditure recognised in the accounts. Alongside this, the schedule requires information on how transactions are priced including the transfer pricing method applied, the profit metric used and key elements of the pricing framework, such as the tested party.

More detailed disclosures are required in certain areas such as:

• Transactions involving intangibles where information on valuation approaches and assumptions must be reported
• Profit split arrangements where disclosure of the profit pool and allocation factors is required
• Financing transactions where additional detail on terms, credit indicators and the use of funds is needed

The ICTS template also includes qualitative questions designed to highlight areas of potential risk, such as business restructurings, changes in transfer pricing policy and transfers of intangible assets. Taken together, the structure is intended to mirror many aspects of a TP local file, but in a format designed for comparison across taxpayers.

When will the ICTS rules be finalised?

The consultation on the detailed design of the ICTS runs until 31 July 2026. HMRC will then finalise the regulations and publish the supporting notice through a statutory instrument. The overall framework is already largely settled ahead of commencement for accounting periods beginning on or after 1 January 2027 but some aspects of the design may still evolve.

How should companies prepare for ICTS compliance?

It is clear that a major increase in TP reporting will start in 2027 and companies should consider how they will meet those new obligations. Key questions tax teams should be finding answers too include:

• Will we have transactions that are reportable? If so, how many?
• Can our current processes and software easily capture and extract the data we will need to report? If not, how will we approach the first in-scope accounting period?
• Will our current TP policies stand up to HMRC scrutiny for the transactions we need to report?

How can we get help with ICTS reporting?

We can help you identify and analyse your likely obligations under the ICTS rules and help you put all the necessary policies, procedures and systems in place so you can be confident of smooth and efficient compliance. We would be delighted to talk to you about how we can help and how our services work. Please complete the enquiry form or contact the author, Simon Wood.