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Transfer Pricing

Prices between group companies that are arm's length, and the evidence to show it.

At a glance

Transfer pricing advice and documentation for groups with transactions between connected companies in different countries, so that prices are set on arm's length terms and can be supported if HMRC asks.

Who this is for

  • •UK companies that are part of an international group
  • •Groups with intra-group services, management charges, loans or royalties
  • •Founders running a UK company alongside an overseas one
  • •Groups facing, or preparing for, an HMRC enquiry into their pricing

What is involved

We map the transactions between group companies and carry out a functional analysis of each one. We then select the most appropriate method, support it with benchmarking where needed, and prepare documentation proportionate to the size of the group. Fees are agreed before work starts.

01

What we offer

  • Functional analysis: who does what, owns what and bears which risks
  • Choosing and applying the most appropriate pricing method
  • Benchmarking against comparable independent companies
  • Intra-group services and management charges
  • Intra-group loans, guarantees and other financing
  • Royalties and the use of intellectual property
  • Master file and local file documentation
  • Support with HMRC enquiries into transfer pricing

02

The UK rules

Arm's length, and able to prove it.

The UK's transfer pricing rules are in Part 4 of the Taxation (International and Other Provisions) Act 2010. Where connected parties trade on terms that independent businesses would not agree, the UK company's profits must be calculated as if arm's length terms had applied. The rules are read in line with the OECD Transfer Pricing Guidelines.

The OECD Guidelines recognise five main methods. Which one is most appropriate depends on the transaction, the information available and what each company actually does.

  • Comparable uncontrolled price (CUP)
  • Resale price
  • Cost plus
  • Transactional net margin method (TNMM)
  • Profit split

03

Does it apply to you?

Many small and medium-sized groups are exempt, but the exemption has conditions and exceptions, particularly for transactions with companies in territories that do not have a suitable tax treaty with the UK.

Larger groups, with global revenue of €750 million or more, must keep a master file and local file in a prescribed form. Everyone else within the rules still needs records that support their pricing.

The rules are changing. For accounting periods beginning on or after 1 January 2026, most transactions between UK companies are exempt, and a new International Controlled Transactions Schedule is planned for accounting periods beginning on or after 1 January 2027.

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FAQ

Frequently asked questions

What is transfer pricing?
Transfer pricing is the price charged for goods, services, loans or intellectual property between companies in the same group. UK tax law requires those prices to be set on arm's length terms, meaning the terms independent businesses would agree. If they are not, the UK company's taxable profit has to be adjusted in its tax return.
Are small and medium-sized groups exempt?
Often, yes. Groups with fewer than 250 staff and either turnover under €50 million or a balance sheet under €43 million, measured across the whole group, are generally exempt. The exemption does not cover transactions with a company in a territory that has no suitable tax treaty with the UK, and HMRC can direct a medium-sized group to apply the rules. We can confirm whether the exemption applies to you.
What documentation do I need?
Groups with global revenue of €750 million or more must keep a master file and local file in a prescribed form, in line with the OECD Guidelines. Other groups are not required to use that format, but still need records that show their prices are arm's length. We prepare documentation proportionate to the size of the group and the value of the transactions.
Do I have to send transfer pricing documentation to HMRC?
Not routinely. The documentation is kept on file and provided if HMRC asks for it, usually during an enquiry. A new International Controlled Transactions Schedule is planned for accounting periods beginning on or after 1 January 2027, and we will help clients prepare for it once the details are final.
Do transactions between two UK companies count?
For accounting periods beginning on or after 1 January 2026, most transactions between UK companies within corporation tax are exempt from the transfer pricing rules. There are exclusions, and HMRC can disapply the exemption where tax would otherwise be lost, so it is worth checking how it applies to your group.
What happens if our prices are wrong?
HMRC can adjust the UK company's profits and collect the extra tax with interest, and penalties may apply if a return was careless. Good documentation is the best protection, and it puts you in a much stronger position if HMRC opens an enquiry.
Can you work with our overseas advisers?
Yes. Transfer pricing has to work on both sides of each transaction, so we work with your advisers in the other countries to keep the group's position consistent.

Need transfer pricing advice?

Tell us about your group and the transactions between its companies.

We reply to every enquiry within 24 hours, in confidence. Prefer email? hello@rmhoconsulting.com

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RMHO Consulting Limited — Based in Dorset, UK — supporting clients worldwide

RMHO Consulting Limited is incorporated in England with Company Registration No. 10486646. Registered office: 8 Mistover Close, Dorchester, DT1 2EQ

Chartered Tax Advisers

Registered with the Chartered Institute of Taxation for the purposes of anti-money laundering legislation

Email: hello@rmhoconsulting.com

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