In July 2025, HM Revenue & Customs (HMRC) published a significant update to its International Manual (sections INTM422160 and INTM422170), incorporating guidelines for using Unilateral Advance Pricing Agreements (APAs) applicable to UK entities participating in Cost Contribution Arrangements (CCAs).
This development belongs to the government’s Corporate Tax Roadmap strategy, a roadmap drawn up by the British government to ensure transparency, efficiency, and competitiveness in its corporate tax system, promoting voluntary compliance by domestic and multinational companies.
Corporate Tax Roadmap and the HMRC’s Role
The Corporate Tax Roadmap, initially released in 2010 and updated in 2021 and 2025, sets out guiding principles for UK corporate tax policy. Its key objectives include:
- Ensuring stability and predictability in the tax system.
- Adapting UK tax legislation to international standards, particularly those of the OECD.
- Promoting the UK as a competitive jurisdiction for investment and innovation.
Within this framework, HMRC has sought to strengthen preventive tools such as Advance Pricing Agreements (APAs), which allow the taxpayer and the tax authority to agree in advance on a Transfer Pricing method applicable to specific transactions, thereby reducing the risk of unilateral adjustments, costly audits, or protracted disputes.
Participation in a CCA: Commercial Substance and Risk Control
A CCA is an instrument that allows several entities within the same group to share the costs of developing or exploiting assets—such as patents, software, or joint research—according to the estimated profits for each taxpayer.
The guide published by HMRC emphasizes that to validate an APA related to a CCA, the UK entity must demonstrate that it plays an effective role in controlling the risks of the agreement and that its economic and operational contribution is not merely symbol. The degree of control over the relevant CCA decisions and whether they reflect a functional is structure consistent with the standards of Chapter VIII of the OECD Model is assessed.
In this context, it is not enough to meet formal requirements; evidence of genuine economic intent, clear contracts, detailed technical records, and rigorous financial analysis supporting the price agreed between the related firms is required.
Unilateral APA and Its Request
A unilateral APA is an agreement between a company and a single tax administration (in this case, HMRC), which agrees in advance on the tax treatment of certain transactions. Unlike a bilateral APA (which involves two jurisdictions), a unilateral APA does not ensure that the other administration will accept the same treatment. Conversely, it still provides certainty in the United Kingdom.
In order to apply for this unilateral APA, the taxpayer must:
- File a formal interest statement to HMRC’s Transfer Pricing office.
- Include a detailed description of the CCA, signed legal agreements, and functional analysis of the parties.
- Support the risk control by the UK shareholder, according to Chapter VIII of the OECD Guidelines.
- Provide financial documentation, economic analysis, and evidence that the proposed methods comply with the Arm’s Length Principle.
HMRC will assess the request based on economic rationality, compliance with international standards, and consistency with other group agreements.
APA Effects and Benefits for Multinational Groups
The guide enables the APA application throughout the CCA validity and, exceptionally, also with retroactive effects for years already audited or in dispute, which allows companies to correct or consolidate their tax position on an advanced and documented basis. At the end of the process, HMRC will:
- Accept the CCA methodology, as long as the economic and functional attributes remain constant during the agreed period.
- Allow the resolution of existing disputes by offering a technical solution before resorting to arbitration or litigation.
- Reduce tax risks, especially in cross-border transactions or joint research projects.
This formalized APA framework strengthens the ability of multinational groups to plan their intellectual property operations, make informed decisions about their international structure, and avoid tax surprises from subsequent adjustments that generate jurisdictional disputes or unnecessary litigation.
Conclusion
The issuance of this guide by HMRC marks a step towards more rational, collaborative taxation adapted to current challenges in Transfer Pricing and joint development of intangibles. The unilateral APA for CCAs not only reinforces legal certainty for UK companies but also aligns its regulations with OECD best practices, without imposing disproportionate burdens.
As the auditing of intellectual property and risks assumed that intensifies worldwide, an understandable, accessible, and solid framework becomes a competitive advantage for multinationals operating from the UK or participating in global innovation projects.
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