Transfer Pricing rules and measures intended to address artificial profit shifting are fundamental pillars of the United Kingdom’s strategy to ensure that multinational groups are properly taxed for the economic activities carried out within its territory.
In this context, HM Revenue & Customs (HMRC) regularly publishes statistics to assess the effectiveness of its enforcement tools and analyze recent trends in international taxation.
The figures for the 2024–2025 fiscal year reflect an intensification of audit 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 amendments to the regulatory framework, including the eventual replacement of the Diverted Profits Tax (DPT) with new rules regarding unassessed Transfer Pricing profits (UTPP) starting in 2026.
Transfer Pricing and Tax Revenue
The UK’s Transfer Pricing Rules stipulate that related-party transactions must be valued in accordance with the internationally recognized Arm’s Length Principle. HMRC monitors and challenges structures that do not correctly allocate profits attributable to activities performed in the country.
In the 2024-2025 fiscal year, additional revenue derived from Transfer Pricing interventions reached approximately £3.4 billion, which is a significant increase compared to previous years. These results reflect the use 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 revenue growth collected 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 (APA) are a preventive tool that allows companies and tax authorities to agree in advance on the Transfer Pricing methodology applicable to certain cross-border transactions. Recognized by the OECD as an international best practice, it reduces tax disputes and provides greater certainty to taxpayers.
During the last fiscal year, 26 agreements were reached, with an average time to conclusion of approximately 44 months, representing a slight improvement over recent years. The UK program aims to negotiate bilateral and multilateral agreements while coordinating with other tax authorities.
The average duration of 43.9 months represents the lowest level observed since 2018–2019. Conversely, the number of new applications decreased significantly compared to the previous fiscal year, which could reflect caution by taxpayers or an increased focus on resolving already initiated procedures.
International Dispute Resolution (MAP)
The Mutual Agreement Procedure (MAP) is the mechanism provided for in double taxation agreements that enables tax authorities to resolve disputes among jurisdictions, particularly regarding Transfer Pricing and profit allocation 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.
Advance Thin Capitalization Agreements (ATCA)
Advance Thin Capitalization Agreements (ATCA) address intra-group financing and determine appropriate levels of indebtedness among related entities. In recent years, the number of these agreements has declined, partly due to 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, showing a decline in the practical relevance of this mechanism after the introduction of CIR rules.
Profit Diversion Compliance Facility
The Profit Diversion Compliance Facility (PDCF), introduced in 2019, enables multinationals to voluntarily regularize situations that could have profit shifting out of the UK. This process allows taxpayers to evaluate their tax structures and submit proposals for regularization to HMRC.
Since its beginning, PDCF has contributed to ensuring over £872 million in additional income and promoted changes in the tax treatment of taxpayers.
HMRC is currently identifying and reaching out to multinational groups that may face risks from profit shifting, urging them to voluntarily regularize before initiating formal actions.
Diverted Profits Tax and the Transition to New Rules
The Diverted Profits Tax (DPT) was designed to discourage artificial structures intended to reduce the tax burden in the United Kingdom and to encourage companies to review their Transfer Pricing policies or bring their tax affairs into compliance.
Conversely, in 2025, the government announced that this tax could be replaced by new rules related to unassessed Transfer Pricing profits (UTPP), which are scheduled to be implemented starting in 2026.
From its introduction in 2015 to 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.
HMRC received 42 notifications in the 2024–2025 fiscal year, compared to 16 in the previous year, indicating that the DPT regime remains relevant in the short term despite the potential for its future elimination.
Conclusion
Altogether, the statistics show a comprehensive approach by HMRC to addressing the risks associated with the international taxation of multinational groups. Combining audits, advance agreements, dispute resolution mechanisms, and measures aimed at combating profit shifting seeks to strengthen tax compliance and protect the UK tax base.
TPC Group, an international specialized firm, assists companies in analyzing their Transfer Pricing policies, managing profit shifting risks, and adapting to regulatory amendments, including the possible transition to new rules related to unassessed Transfer Pricing profits (UTPP) expected for 2026.
Source: Gov.uk