INTM489105 - Unassessed Transfer Pricing Profits: Introduction

UTPP will apply to accounting periods beginning on or after 1 January 2026.  This guidance will be updated with detailed examples by 1 January 2026.  For earlier accounting periods please use the diverted profits tax guidance at INTM489500


Background

TIOPA10/Part 4A/Chapter 1

The Unassessed Transfer Pricing Profits rules (hereafter UTPP) were introduced in 2025 as an extension of the transfer pricing rules contained in TIOPA10/Part 4 (INTM410000). UTPP sits within the corporation tax regime but applies a higher tax rate. It applies to accounting periods beginning on or after 1 January 2026.

UTPP replaces the Diverted Profits Tax regime (hereafter DPT) in FA2015/Part 3. DPT was announced in the 2014 Autumn Budget and applied to accounting periods beginning between 1 April 2015 and 31 December 2025. You can find out more about DPT at INTM489500.

UTPP's Purpose

UTPP is a targeted anti-avoidance tool which aims to deter and counter the use of contrived arrangements by multinationals to circumvent the UK’s transfer pricing rules and thereby avoid paying tax on profits that have been generated in the UK. UTPP does not create an additional tax liability which does not otherwise exist, but rather identifies profits that should have been returned in the company’s tax return and assesses them to corporation tax at a higher rate within an enhanced compliance framework. 

UTPP’s purpose is to encourage businesses which have diverted their profits to correct their transfer pricing position and change their behaviour so that profits generated from economic activity carried out in the UK are fully and properly taxed here. UTPP also aims to reduce the information bias inherent in transfer pricing cases, and promote full disclosure and early engagement with HMRC. UTPP is intended to have the same scope as its predecessor DPT, so that it applies to the same type of arrangements.

Summary of UTPP

UTPP will broadly apply where the following conditions are all met:

  • profits that ought to have been included by virtue of the UK’s transfer pricing rules were omitted from the company’s tax return
  • this omission has secured a reduction in UK tax without a commensurate increase in tax in another jurisdiction (an Effective Tax Mismatch Outcome or ETMO)
  • it is reasonable to assume that the arrangements were designed to achieve that UK tax reduction (the Tax Design Condition or TDC)

Although companies are required to comply with the UK’s transfer pricing rules in their company tax return, UTPP is not administered through the self-assessment process. Companies will only be subject to tax under this part if they receive a UTPP assessment from HMRC. 

UTPP’s key features include:  

  • a higher corporation tax rate - a 6% higher rate than the amount of corporation tax that would otherwise have been charged
  • an upfront tax charge - due within 30 days of a UTPP assessment. This charge cannot usually be postponed
  • a 15-month period for amendments - companies have a 15-month period after receiving a UTPP assessment in which to engage with HMRC and amend their company tax return to correctly apply the transfer pricing rules.  This period for amendments can be ended early by agreement with HMRC.
  • appeal rights - companies can only appeal against a UTPP assessment once the period for amendments has ended and the tax has been paid

To ensure that UTPP remains a targeted anti-avoidance tool, the legislation contains safeguards for taxpayers. UTPP notices and assessments must be issued by a designated officer, and if a designated officer considers at any time that the assessment is excessive or the conditions are not met then they must amend or withdraw it accordingly.

Given that UTPP is part of the corporation tax regime, it is therefore within scope of the UK’s double tax treaty network and companies subject to UTPP are entitled to access treaty benefits in the normal way.

The UTPP Legislation

The UTPP rules are split into five parts:

  • Chapter 1 (TIOPA10/217A-217B) sets out when a company has unassessed transfer pricing profits, what the amount of those profits are, and how they are assessed to corporation tax
  • Chapter 2 (TIOPA10/S217C-217E) contains the two gateways: the Effective Tax Mismatch Outcome (ETMO) and Tax Design Condition (TDC), which must be met for a company to be assessed under UTPP
  • Chapter 3 (TIOPA10/S217F-217R) sets out the process to be followed by HMRC in issuing a preliminary notice, making an assessment, amending or withdrawing an assessment, and issuing any related closure notices. It also sets out the process to be followed by taxpayers in amending their company tax return, and requesting a review or making an appeal
  • Chapter 4 (TIOPA10/S217S) contains minor definitions

  • Schedule 1A explains how UTPP applies to partnerships and Lloyd’s syndicates

The UTPP Guidance

This guidance is split into four parts:

  • the UTPP Conditions – sets out the conditions and gateways that must be met for UTPP to apply (Chapters 1, 2 and 4 of the legislation) 
  • the UTPP Process – explains the mechanics and timelines of the UTPP assessment process (Chapter 3 of the legislation)
  • UTPP Practical Guidance – provides advice for HMRC officers on the approach to use when administering UTPP and engaging with affected businesses 
  • UTPP Examples [to be released in early 2026]

Legislative references in the guidance are to the Taxation (International and Other Provisions) Act 2010 or TIOPA10 unless stated otherwise.