{"id":6080,"date":"2025-12-15T18:29:18","date_gmt":"2025-12-15T18:29:18","guid":{"rendered":"https:\/\/well-tax.com\/?p=6080"},"modified":"2025-12-15T18:29:19","modified_gmt":"2025-12-15T18:29:19","slug":"reforme-des-prix-de-transfert-au-royaume-uni-etablissement-stable-et-impot-sur-les-benefices-detournes-resultats-de-la-consultation","status":"publish","type":"post","link":"https:\/\/well-tax.com\/fr\/reform-of-uk-transfer-pricing-permanent-establishment-and-diverted-profits-tax-consultation-outcomes\/","title":{"rendered":"R\u00e9forme du r\u00e9gime britannique des prix de transfert, des \u00e9tablissements stables et de l'imp\u00f4t sur les b\u00e9n\u00e9fices d\u00e9tourn\u00e9s \u2014 R\u00e9sultats de la consultation"},"content":{"rendered":"\n
\"UK<\/figure>\n\n\n\n

The UK is introducing a substantial reform of its UK Transfer Pricing, Permanent Establishment and Diverted Profits Tax framework, with most changes applying from 1 January 2026. The aim is to simplify legislation, improve alignment with OECD standards, and reduce compliance burdens, especially for UK-to-UK transfer pricing. Businesses operating internationally (or investing into the UK) should assess their governance structures, intercompany agreements and Transfer Pricing documentation before the new rules are enforced. A strategic review in 2025 may help mitigate risk and align processes ahead of the reform.<\/p>\n\n\n\n

Introduction<\/h2>\n\n\n\n

The UK government has now published the results of the consultation \u201cReform of UK law in relation to transfer pricing, permanent establishment, and Diverted Profits Tax (DPT)\u201d, which ran between 28 April and 7 July 2025. This was a detailed technical consultation following the policy-level consultation initiated in 2023.<\/p>\n\n\n\n

Over 150 stakeholders participated in public events, and 45 written responses were received from major law firms, tax advisors, representative bodies and multinational businesses. The feedback has shaped the final draft of the legislation, which will be included in the Finance Bill 2025\u20132026, with most measures applying to accounting periods commencing on or after 1 January 2026. Certain amendments concerning financial transactions will include transitional rules.<\/p>\n\n\n\n

The reform aims to modernise and simplify UK legislation, align it further with OECD standards, and provide greater clarity around the practical application of existing UK Transfer Pricing and Permanent Establishment principles, an area that has often been complex and fragmented.<\/p>\n\n\n\n

If you want to learn more about these topics, check out our comprehensive guide on UK CFC Rules and Transfer Pricing here<\/a>.<\/p>\n\n\n\n

Key Areas of Reform<\/h2>\n\n\n\n

1. UK Transfer Pricing Framework<\/h3>\n\n\n\n

One of the most debated topics was the \u2018participation condition\u2019, which determines when two entities are considered sufficiently connected for transfer pricing rules to apply. Stakeholders argued that the initial draft created uncertainty and could unintentionally affect commercial arrangements such as franchise networks, investment funds or professional alliances.<\/p>\n\n\n\n

As a result, the definition of \u201ccommon management\u201d has been significantly narrowed. The final draft focuses only on structures where there is (i) a legal arrangement, (ii) unified senior management, and (iii) shared economic outcomes through a defined mechanism. HMRC will publish examples in the guidance to help establish the boundaries of this provision.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

HMRC will retain the power to issue UK transfer pricing notices based on Article 9 of the OECD Model Tax Convention, although the legislation will clarify that such notices apply only to the current accounting period and future periods. The anti-avoidance rule based on a \u201cmain purpose\u201d test will also remain in place, supported by practical guidance when issued.<\/p>\n\n\n\n

A major change widely welcomed was the repeal of UK-to-UK transfer pricing, which is considered a meaningful simplification that should reduce compliance burdens without creating material fiscal risk for HMRC. However, the exemption includes important exclusions, particularly in the financial services sector. HMRC will also retain the ability to disapply the exemption \u2013 but only when necessary to prevent a net loss of UK tax. Guidance will specify when this may occur and who within HMRC will exercise these powers.<\/p>\n\n\n\n

Several technical clarifications have also been provided. Notably:<\/p>\n\n\n\n

    \n
  • \u201cSame rate of tax\u201d is understood to mean the statutory rate.<\/li>\n\n\n\n
  • The term \u201creference currency\u201d is deliberately broader than \u201cfunctional currency\u201d, as it must reflect the currency used to calculate taxable profits in certain situations \u2014 particularly where foreign branches are involved.<\/li>\n<\/ul>\n\n\n\n

    2. Intangibles and IP Transactions<\/h3>\n\n\n\n

    There was clear support for moving to a single valuation standard, with \u2018market value\u2019 being used for domestic transactions. This change is expected to improve consistency with other UK tax regimes. However, the existing \u2018one-way street\u2019 rule for licence arrangements (which prevents double non-taxation) will remain in place, at least initially. The government has agreed that the rule may require review in future, but the focus at this stage is on clarifying valuation standards.<\/p>\n\n\n\n

    Concerns were also raised regarding the assumption, in current legislation, that consideration for IP must always be monetary. HMRC agreed to clarify through guidance that this rule only applies when consideration is non-monetary, and does not apply where no consideration is paid in commercial royalty-free licensing arrangements.<\/p>\n\n\n\t\t

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