INTM489345 - The Unassessed Transfer Pricing Profits Practical Guidance: Corporation Tax Enquiries

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

It is not strictly necessary to open an enquiry into the company tax return as a precursor to issuing a UTPP assessment. However, where HMRC identifies a transfer pricing inaccuracy that may fall within scope of UTPP then it is best practice to open an enquiry into a company tax return before commencing the UTPP process. HMRC must open an enquiry within the normal time limits (usually 12 months from the filing date, see EM1510).

UTPP is resource-intensive for both HMRC and companies. Where possible, HMRC should generally use the corporation tax enquiry process as an opportunity to fact find and reach a resolution to the transfer pricing inaccuracy, particularly where no preliminary notice has been issued for any previous accounting periods.

HMRC should consider applying UTPP where there have been difficulties fact finding because of a lack of engagement or repeated delay in providing information by the company, or where it is unlikely that an agreement will be made with the company in the foreseeable future.

UTPP should never be used simply to extend the time limit for HMRC to enquire into a routine transfer pricing inaccuracy because the normal time limit has expired. Likewise, UTPP should never be used simply to delay or prevent the closure of a corporation tax enquiry.

Where there is already an enquiry into a company tax return, before applying UTPP, HMRC should check that the company has not made any amendments, as part of that enquiry, which will have the effect of bringing the unassessed transfer pricing profits into charge to corporation tax.

Where HMRC is not in time to open an enquiry into a company tax return and a risk review indicates that there is both a UTPP and discovery assessing position it will be best practise to pursue the amount via the UTPP rules. This will protect both assessing positions without raising multiple charges on the company. HMRC should work with the customer during the period for amendments to refine our view on the UTPP position including the amount of the charge and whether the gateway conditions are met.

It is important for HMRC to differentiate between a routine transfer pricing issue, and a transfer pricing issue which is within scope of UTPP. Indications that a transfer pricing issue may be suitable to be worked under the UTPP rules include:

  • it is reasonable to assume that the company’s transfer pricing strategy is designed to reduce, eliminate or delay UK tax liability, or there is a degree of contrivance in the structure of the arrangements, such that the TDC is met (see INTM489140)
  • the company has secured a material overall tax reduction from the arrangements giving rise to the profits, such that there is an ETMO for the accounting period (see INTM489130)

Transfer Pricing Settlements

Where the case team wishes to recommend acceptance of a resolution proposal put forward by the customer then this will be subject to the usual compliance governance process which includes review by independent senior officers and potentially dispute resolution governance boards.

A transfer pricing settlement agreement does not need to be formally approved by the designated officer, however they will decide the impact of that transfer pricing settlement on the UTPP charge. Therefore, the designated officer is a key stakeholder and their opinion is necessary before the case is considered by a governance body or the case is otherwise resolved.

For a case to be finalised the designated officer must consider whether the UTPP assessment should be increased, decreased, reduced to nil, or amended to charge corporation tax at the underlying rate. To give full consideration the Designated Officer needs to understand the impact of the settlement proposal on the unassessed transfer pricing profits which were charged to UTPP.

To facilitate this, case teams should liaise with the DP Unit to list their case for a DAG meeting and share their submissions before or at the same time as it is shared with the relevant governance body or otherwise resolved. Case teams can use their governance submission and, if necessary, include a supplementary note on their view of the settlement’s impact on the unassessed transfer pricing profits.

This will prevent issues arising after governance board decisions, as well as shortening the time process for case teams as all necessary governance documents will be submitted at the same time.