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HMRC consultation on draft transfer pricing records regulations

  • United Kingdom
  • Tax planning and consultancy


HMRC have published for consultation a draft version of The Transfer Pricing Records Regulations 2023, which require Multinational Enterprises (MNEs) with turnover of €750m or more, operating in the UK, to keep and preserve a Master File and Local File, in accordance with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022 (the Transfer Pricing Guidelines).


In 2015, the OECD published its Action 13 Final Report on Transfer Pricing Documentation and Country-by-Country Reporting, as part of the OECD/G20 Base Erosion and Profit Shifting Project. In order to provide tax administrations with useful information to employ in conducting a thorough transfer pricing audit, the report recommended a standardised three-tiered approach to transfer pricing documentation, consisting of (i) a Master File containing standardised information relevant for all MNE group members; (ii) a Local File referring specifically to material transactions of the local taxpayer (transaction-based documentation); and (iii) a Country-by-Country Report containing certain information relating to the global allocation of the MNE’s income and taxes paid, together with certain indicators of the location of economic activity within the MNE group.

The UK implemented Country-by-Country reporting, but did not introduce a requirement to keep and preserve the Master File and Local File, on the basis the UK already had broad record keeping requirements. However, following a consultation in 2021, HMRC announced that, in 2022, they would consult on draft legislation for a measure requiring large multinational businesses operating in the UK to maintain a Master File and a Local File in a prescribed and standardised format.

HMRC’s policy paper in July 2022 stated that Experience has shown that the absence of specific transfer pricing documentation requirements, and supporting guidance, has created a degree of uncertainty for UK businesses regarding the appropriate transfer pricing documentation they need to keep, leading to inconsistency of approach”. This policy paper was accompanied by draft legislation which included amendments to the Finance Act 1998 and Taxes Management Act 1970 to create new powers to enable regulations to specify certain transfer pricing records which must be kept and preserved. HMRC have now published the draft regulations to be made pursuant to that legislation.

Draft regulations

The regulations will have effect in relation to accounting periods beginning on or after 1 April 2023 for corporation tax purposes, and in relation to the 2024/25 tax year and subsequent years for income tax purposes.

Under the draft regulations, a person must keep and preserve specified transfer pricing records in relation to periods in which the person, together with one or more persons, constitutes an MNE Group which meets the threshold requirement (broadly, that the total consolidated annual group revenue is at least €750 million). The specified transfer pricing records are a Local File and a Master File, as described in Annex II to Chapter V and Annex I to Chapter V of the Transfer Pricing Guidelines, respectively, and supplementary information relating to the preparation of the Local File.

Cross-border controlled transactions between related group companies, or between an enterprise and its permanent establishment in another jurisdiction, which meet the participation condition in section 148 of Taxation (International and Other Provisions) Act 2010 (i.e. “relevant transactions”), need to be documented in the Local File, unless one of the affected group companies (i) has made an election under section 357A of the Corporation Tax Act 2010, or (ii) is carrying out a ring fence trade. The Local File documents the relevant transactions with reference to the relating mutual functional risk profile of the affected group companies, a value chain and an economic analysis.

The draft regulations state that HMRC may specify, in a published notice, supplementary information relating to the preparation of the Local File, and the form and manner in which that information is to be kept and preserved. HMRC intends to consult separately on the introduction of a requirement for MNEs to produce a Summary Audit Trail (SAT), which is a document covering the steps taken by members of an in-scope MNE in completing their Local File. Following that consultation, a decision will be made regarding the commencement of the SAT requirement.

HMRC’s consultation on the draft legislation will close on 31 January 2023.

Why it matters

MNEs operating in the UK should ensure they familiarise themselves with the new record-keeping requirements in advance of the April 2023 implementation date. This is particularly important given the amendments (included in the draft legislation published in July 2021) to the penalties regime in Schedule 24 Finance Act 2007, which clarify that failures to do the work necessary to maintain relevant transfer pricing records or to produce those records on request will lead to the presumption that a relevant inaccuracy is careless.


If you would like to discuss the impact of the new transfer pricing documentation requirements on your business, please do not hesitate to get in touch with one of the contacts listed below.