The “Transfer Pricing and Diverted Profits Tax Statistics 2023 to 2024” report published by HM Revenue & Customs (HMRC) provides a comprehensive view of the effects of tax measures in the UK to ensure fair taxation. This report analyzes the implementation of Transfer Pricing, Advance Pricing Agreements (APAs), the Mutual Agreement Procedure (MAP), and the Diverted Profits Tax (DPT) against tax avoidance and encourage international cooperation. Each of these instruments is crucial to the UK tax system in addressing related company transactions, reducing international tax disputes, and counteracting aggressive tax planning strategies employed by some multinationals.
Transfer Pricing in the UK
Transfer Pricing regulates related party transactions to ensure that they follow the Arm’s Length Principle. This framework aims to prevent artificial profit shifting to lower tax jurisdictions by providing a fairer distribution of the tax burden. In the UK, HMRC strictly monitors these transactions, auditing and implementing necessary adjustments to ensure compliance with regulations. In recent years, HMRC has intensified its efforts, reflected in a significant increase in the additional tax yield derived from Transfer Pricing audits.
Transfer Pricing Yield
| Fiscal Year | Additional Tax Return (£ millions) |
| 2018-19 | 1,169 |
| 2019-20 | 1,454 |
| 2020-21 | 2,162 |
| 2021-22 | 1,482 |
| 2022-23 | 1,635 |
| 2023-24 | 1.786 |
HMRC investigations
HMRC investigates for regulator compliance, resolving 128 cases between 2023 and 2024. Likewise, the average duration has remained between 31 and 39 months.
| Fiscal Year | Cases Resolved | Average Duration (months) |
| 2018-19 | 138 | 33.1 |
| 2019-20 | 125 | 31.4 |
| 2020-21 | 124 | 36.0 |
| 2021-22 | 175 | 34.0 |
| 2022-23 | 153 | 38.9 |
| 2023-24 | 128 | 33.1 |
Advance Pricing Agreements (APAs)
Advance Pricing Agreements (APAs) allow companies to agree Transfer Pricing methodologies with HMRC for eventual transactions, providing tax certainty and reducing the risk of disputes. This mechanism has become valuable for encouraging transparency and voluntary compliance among multinational companies operating in the UK. Although negotiating APAs can be complex and lengthy, their benefits lie in removing tax uncertainty and avoiding costly litigation.
| Fiscal Year | APAs Concluded | Average Duration (months) |
| 2018-19 | 30 | 33.6 |
| 2019-20 | 26 | 47.9 |
| 2020-21 | 24 | 55.5 |
| 2021-22 | 20 | 58.3 |
| 2022-23 | 15 | 45.5 |
| 2023-24 | 27 | 53.0 |
Mutual Agreement Procedure (MAP)
The Mutual Agreement Procedure (MAP) resolves international tax disputes and avoids double taxation. HMRC works with foreign tax authorities closely under international tax treaties to ensure fair taxation and avoid divergent interpretations of tax regulations. This mechanism benefits companies by reducing their overall tax burden and strengthening international tax relations.
| Fiscal Year | Completed MAP Cases | Average Duration (months) |
| 2018-19 | 95 | 27.0 |
| 2019-20 | 72 | 22.9 |
| 2020-21 | 62 | 34.4 |
| 2021-22 | 131 | 21.1 |
| 2022-23 | 131 | 28.4 |
| 2023-24 | 86 | 28.8 |
Diverted Profits Tax (DPT)
The Diversionary Profits Tax (DPT) is a measure introduced by the United Kingdom to counteract tax base erosion and profit shifting. Designed to address aggressive tax strategies employed by some multinationals, the DPT charges an additional levy on profits that are not fully attributable to the UK under the Transfer Pricing framework. This tool reflects HMRC’s commitment to ensuring that multinational companies pay fair tax on profits generated on UK territory.
| Fiscal Year | DPT Net Revenue (£ millions) |
| 2018-19 | 12 |
| 2019-20 | 17 |
| 2020-21 | 151 |
| 2021-22 | 198 |
| 2022-23 | 40 |
| 2023-24 | 108 |
The DPT table displays the net revenue progress of this tax from the 2018-19 tax year to 2023-24. There is marked variability in the amounts collected, highlighting 2020-21 (£151 million) and 2021-22 (£198 million), followed by a decrease in 2022-23 (£40 million). The increase in 2023-24 (£108 million) reflects the effects of more targeted strategies by HMRC to counteract tax erosion, although it also highlights challenges in the consistency of this tax measure.
Conclusions
The Transfer Pricing and Diverted Profits Tax Statistics 2023 to 2024 report highlights Transfer Pricing, APAs, MAPs, and DPT in UK tax policy. These tools ensure fair taxation, prevent tax avoidance, and strengthen transparency and international cooperation. Continuous improvement in implementing these tools reinforces HMRC’s commitment to an efficient and fair tax system.
Source: GOV UK