The rules on Transfer Pricing and measures designed to combat the artificial shifting of profits are fundamental pillars of the United Kingdom’s strategy to ensure that multinational groups are properly taxed for the economic activities they carry out within its territory.
In this context, HM Revenue & Customs (HMRC) regularly publishes statistics that allow for an assessment of how its enforcement tools are functioning and an analysis of recent trends in international taxation.
The figures for the 2024–2025 fiscal year reflect an intensification of enforcement and dispute resolution activities, as well as greater effectiveness by HMRC in identifying transfer pricing and profit shifting risks. Likewise, the data highlight the impact of instruments designed to address profit shifting and foreshadow potential changes to the regulatory framework, including the eventual replacement of the Diverted Profits Tax (DPT) with new rules regarding unassessed transfer pricing (UTPP) starting in 2026.
Transfer Pricing and Tax Revenue
The UK’s transfer pricing rules stipulate that transactions between related parties must be valued in accordance with the internationally recognized arm’s length principle. Under this framework, HMRC monitors and challenges structures that do not appropriately allocate profits attributable to activities carried out in the country.
In the 2024-2025 fiscal year, additional revenue derived from transfer pricing interventions reached approximately £3.4 billion, representing a significant increase compared to previous years. These results reflect the application of various compliance tools, including tax audits, early interventions, and cooperation mechanisms with taxpayers.
This result is particularly significant given that it is roughly equivalent to the sum of the additional revenue collected in the two previous fiscal years. Furthermore, although the number of closed cases increased from 128 to 143, the growth in revenue collection was much greater, suggesting that HMRC is focusing its efforts on cases of greater complexity or economic impact.
Advance Pricing Agreements (APA)
Advance Pricing Agreements (APAs) are a preventive tool that allows companies and the tax administration to agree in advance on the transfer pricing methodology applicable to certain cross-border transactions. Recognized by the OECD as an international best practice, this tool helps reduce tax disputes and provides greater certainty to taxpayers.
During the last fiscal year, 26 agreements were reached, while the average time to conclusion stood at approximately 44 months, representing a slight improvement compared to recent years. The UK program prioritizes the negotiation of bilateral or multilateral agreements, which involves coordination with other tax authorities.
The average duration of 43.9 months represents the lowest level observed since 2018–2019. However, the number of new requests decreased significantly compared to the previous fiscal year, which could reflect caution on the part of taxpayers or a greater focus on resolving procedures already initiated.
International Dispute Resolution (MAP)
The Mutual Agreement Procedure (MAP) is the mechanism provided for in double taxation treaties that allows tax administrations to resolve disputes between jurisdictions, particularly regarding transfer pricing and the allocation of profits to permanent establishments.
In 2024–2025, HMRC resolved 115 cases, with an average resolution time of approximately 25 months. According to OECD statistics, the United Kingdom continues to resolve these cases below the global average, reflecting a relatively efficient management of international tax disputes.
Furthermore, the United Kingdom resolved a high proportion of cases through full relief from double taxation or equivalent solutions, ranking above the global average in terms of effectiveness.
Thin Capitalization Agreements (ATCA)
Advance Thin Capitalisation Agreements (ATCA) address intra-group financing and determine appropriate levels of indebtedness between related entities. In recent years, the number of these agreements has declined, partly as a result of the introduction of Corporate Interest Restriction (CIR) rules, which limit interest deductions to a level commensurate with taxable economic activity in the United Kingdom.
Indeed, while 45 agreements were reached in 2019–2020, only 2 were concluded in 2024–2025, demonstrating a loss of practical relevance for this mechanism following the introduction of the CIR rules.
Profit Diversion Compliance Facility
The Profit Diversion Compliance Facility (PDCF), introduced in 2019, allows multinationals to voluntarily regularize situations in which profits may have been diverted outside the United Kingdom. This mechanism enables taxpayers to review their tax structures and submit regularization proposals to HMRC.
Since its creation, the PDCF has helped secure over £872 million in additional revenue and has encouraged changes in taxpayers’ tax behavior.
HMRC continues to identify and contact multinational groups potentially exposed to profit diversion risks, encouraging voluntary regularization before initiating formal proceedings.
Diverted Profits Tax and Transition to New Rules
The Diverted Profits Tax (DPT) was designed to discourage artificial structures intended to reduce the tax burden in the UK and encourage companies to review their transfer pricing policies or regularize their tax status.
However, in 2025 the government announced that this tax could be replaced by new rules related to unassessed transfer pricing (UTPP), which are scheduled to be implemented starting in 2026.
From its introduction in 2015 through March 2025, measures related to the DPT have secured over £10.5 billion in additional tax revenue, primarily through transfer pricing adjustments and changes in corporate structures.
Despite the potential future elimination of the DPT, HMRC received 42 notifications during 2024–2025, compared to 16 in the previous fiscal year, demonstrating that this regime remains relevant in the short term.
Conclusion
Overall, the statistics demonstrate a comprehensive approach by HMRC to addressing the risks associated with the international taxation of multinational groups. The combination of audits, advance pricing agreements, dispute resolution mechanisms, and measures aimed at combating profit shifting seeks to strengthen tax compliance and protect the UK’s tax base.
TPC Group, as a specialized firm with an international presence, assists companies in analyzing their transfer pricing policies, managing risks associated with profit shifting, and adapting to regulatory changes, including the potential transition to new rules related to unassessed transfer pricing (UTPP) scheduled for 2026.
Source: Gov.uk