UK transfer pricing changes from April 2023

UK transfer pricing changes from April 2023

Changes to documentation required by the UK tax authorities take effect for accounting periods beginning on or after 1 April 2023.

Who it applies to

These changes apply to all companies with Group revenue exceeding consolidated Group revenue of €750m in the period in question (the same revenue level as the CbCR threshold).

What are the current rules?

Currently, UK transfer pricing rules don’t explicitly require OECD Local Files and Master Files to be prepared to support a group’s transfer pricing, they only require that ‘sufficient documentation’ is in place to demonstrate that a tax return is correct and complete. However, HMRC has stated that for companies with a material UK presence they regard maintaining a Local File and Master File to be best practice.

What is changing?

UK law will, for the first time, mandate a standardised approach to transfer pricing, making it a legal requirement for groups to maintain the following documentation:

  • A Master File which sets out an overview of the group’s business, the nature of its global operations, its value drivers, its overall transfer pricing policies and its global allocation of income and economic activity. Ideally, this should include a detailed value chain analysis considering how different parts of an international group work together to create value and defining value created by each of those parts.
  • Local country files which incorporate details of material intragroup transactions for the local taxpayer for the year and supporting pricing analysis for each entity.

Summary Audit Trail delayed

Despite the fact that the Government has already held a consultation on transfer pricing documentation in 2020, and draft legislation being released in 2022, the Government has decided that more consultation is needed before the additional requirement to produce a Summary Audit Trail (SAT) is finally introduced.

Although it is good news that this new record keeping obligation will not be imposed just yet, it is still intended some form of SAT will become part of standard TP documentation in the UK. Initially, it was envisaged that the SAT would sit alongside the UK Local File and take the form of a short questionnaire (just two pages in the draft we have seen) which summarises the work undertaken by the taxpayer in reaching the conclusions set out in their TP Local File. Whether it will be retained in this form and whether the Government’s original proposal to introduce an 'International Dealings Schedule' will reappear, remains to be seen.

We suspect that the key theme behind the SAT - for the taxpayer to certify that the necessary TP documentation has been prepared, and then kept continuously up-to-date according to changes to the business – will be retained, whatever form any new documentation takes.


The proposal to introduce a SAT, and the explicit requirement for a Local File and Master File represents part of a broader signalling to taxpayers, and large businesses in particular, that they will likely be subject to increasing scrutiny, and higher expectations on how they support, document and implement their transfer pricing policies. This increasing focus and clarity over what is expected regarding operational transfer pricing, may have the effect of lowering the threshold of what HMRC regards as constituting ‘carelessness’ for the purposes of calculating both fixed penalties for deficient documentation and tax-geared penalties in the event of a transfer pricing adjustment on enquiry.’

HMRC’s recent transfer pricing enquiry activities have resulted in the highest-ever tax yields - increasing sharply to pass £2 billion in 2020-2021 for the first time. Given the risk of tax-geared penalties, businesses who fall within these rules should be considering undertaking a risk or gap analysis to ascertain how they will need to amend their compliance policies.

How we can help

Do you have transfer pricing documentation in the recommended OECD format and when it was last prepared? If you don’t or the documents have been overtaken by recent market events or organisational changes we can help you bring things up to date to give you a robust defence against HMRC enquiry.

Our award-winning National UK Transfer Pricing team of experts has technical expertise in tax, law, economics and finance across a wide range of industries. We are part of the BDO Global network that includes dedicated Transfer pricing experts in more than 50 countries bringing you the benefit of our global reach and knowledge to develop and implement effective transfer pricing policies and compliance solutions. Please get in touch with our team.