UK’s Chancellor of the Exchequer Rachel Reeves, in her Autumn Budget 2025 announcement on 30 October 2024, said her government is considering modernising the country’s transfer pricing rules and the advance pricing agreement system.
Reeves said the government will publish a further consultation on reforms to the UK’s rules on transfer pricing, permanent establishments, and Diverted Profits Tax in spring 2025. This includes the potential removal of UK-to-UK transfer pricing. The government will also review transfer pricing for cost contribution arrangements to ensure that the rules are specific and do not deter investment in the UK.
The government will also publish consultations in spring 2025 on further changes to the transfer pricing rules, which includes:
- Considerations for lowering the thresholds for exemption from transfer pricing for medium-sized businesses while retaining an exemption for small businesses; and
- introducing a requirement for multinationals in the scope of transfer pricing rules to report information to HMRC on certain cross-border related party transactions.
The government plans to introduce technical amendments in the Finance Bill 2024-25, ensuring that Advance Pricing Agreements are available for financing arrangements under Transfer Pricing rules, consistent with HMRC’s existing Statement of Practice.
Multinational Top-up Tax: Undertaxed Profits Rule – OECD Pillar Two
The government plans to legislate the Undertaxed Profits Rule (UTPR) in the Finance Bill 2024-25. It will be implemented for accounting periods starting or after 31 December 2024. The Finance Bill 2024-25 will also feature technical amendments to the multinational and domestic top-up tax legislation.
