INTM489315 - The Unassessed Transfer Pricing Profits Practical Guidance: Pre-UTPP Engagement by Companies
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
Unlike DPT, there is no formal notification requirement for companies within scope of UTPP. Companies are expected to apply UK transfer pricing rules correctly in their self-assessment return, and if HMRC identifies unassessed transfer pricing profits then it will consider whether to apply the UTPP rules.
Clearances and Informal Views
The UTPP rules are an anti-avoidance tool and therefore no statutory or non-statutory clearances will be granted in respect of their application.
Additionally, HMRC will not usually provide an informal view on whether transactions are likely to fall within the scope of UTPP, as this would require considerable resource from the company and HMRC to obtain the necessary assurance about the level of UTPP risk.
HMRC is committed to meeting its international exchange of information obligations. If HMRC did provide an opinion on the application of UTPP to customer arrangements this may constitute a “ruling” for international taxation purposes, meaning it is very likely to be required to be exchanged with another jurisdiction. For more information, including whether, when, and how HMRC exchange or make requests to foreign fiscal authorities for such rulings, please consult IEIM500000 onwards.
Profit Diversion Compliance Facility (PFCF)
HMRC prefers companies to fully disclose significant tax uncertainties or inaccuracies and to ensure compliance with tax law, and will work co-operatively, proactively and transparently with companies to resolve any tax uncertainties and risks. In January 2019, HMRC introduced the Profit Diversion Compliance Facility (PDCF) for multinational enterprises (MNEs) using arrangements that are targeted by DPT to give them the opportunity to bring their tax affairs up to date in an efficient manner.
The PDCF will now also apply to MNEs who use arrangements that are targeted by UTPP to encourage multinational enterprises with arrangements that might fall within its scope to review both the design and implementation of their TP policies, change them if appropriate, and use the facility to put forward a report with proposals to pay any additional tax, interest and, where applicable, penalties due.
Advance Pricing Agreements
Businesses may obtain assurance on the transfer pricing treatment of material or uncertain cross-border transactions by entering into an Advance Pricing Agreement (APA) with HMRC. The APA process is designed to agree an appropriate methodology in advance and reduce the risk of future disputes. Detailed guidance is available in INTM422010.
A UTPP assessment cannot be made on a basis that is inconsistent with the terms of an APA.
However, in the event that an APA is annulled or revoked, as set out at INTM422110 (Revocation) and INTM422120 (Annulment), the UTTP rules may apply.
Advance Thin Capitalisation Agreements
The UTPP exclusion for excepted loan relationship outcomes should mean that in most circumstances Advance Thin Capitalisation Agreements (ATCAs) will not be directly affected by UTPP. Nevertheless, in cases where a group’s wider arrangements give rise to UTPP risks then HMRC will consider whether they also give rise to issues with the pricing of financial transactions.