INTM489125 - Unassessed Transfer Pricing Profits Conditions: Calculating Unassessed Transfer Pricing Profits

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

TIOPA10/S217B

The unassessed transfer pricing profits that a company has for an accounting period, are the amount of profits that:

  • are not reflected in the company’s tax return, and 
  • should have been brought into account in the company’s tax return under the transfer pricing requirement.

Where the company’s tax return includes losses which should not have been brought into account under the transfer pricing requirement, then the unassessed transfer pricing profits are the amount of profits that, if they were brought into account, would have the same result as not bringing into account those losses.

Where a failure to fully reflect the transfer pricing requirement has moved the company from a profit-making to a loss-making position, then the unassessed transfer pricing profits will be comprised of two elements; the amount of profits that are not reflected in the self-assessment, and the amount of profits that have the same result as not bringing into account the losses.

There will still be unassessed transfer pricing profits where the transfer pricing requirement was partly reflected, for example if an accounting or computational adjustment is made to a provision under the transfer pricing rules but it does not fully bring the provision in line with the arm’s length position.

Where HMRC lacks complete information to fully determine the amount of unassessed transfer pricing profits, S217F(2)(b) provides that the designated officer may proceed on their best judgement (see INTM489215).

Part of the purpose of UTPP is to address the information bias inherent in complex transfer pricing cases involving overseas entities, by encouraging businesses to be forthcoming in providing HMRC with relevant information. Businesses are expected to engage with HMRC during the period for amendments, and the assessment of the unassessed transfer pricing profits can be adjusted during that period on the basis of those discussions.

It should be noted that the transfer pricing legislation does not require an adjustment to the arm’s length value in the calculation of a chargeable gain (or allowable loss), and therefore UTPP will not apply to capital gains.