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The Chartered Institute of Taxation (CIOT) has submitted its official response to HMRC’s consultation Transfer Pricing: Scope and Documentation, offering measured support for key changes while proposing refinements to better balance compliance burdens with tax integrity.
The consultation, published earlier this year, explores two principal proposals aimed at strengthening the UK’s transfer pricing (TP) framework and protecting its tax base:
- Amending the current exemption for small and medium-sized enterprises (SMEs)
- Introducing a reporting requirement for multinationals on cross-border related-party transactions
These proposals are separate from the broader consultation on Reform of Transfer Pricing, Permanent Establishment and Diverted Profits Tax, also underway.
CIOT Supports SME Reform, But Calls for Higher Threshold
The CIOT broadly agrees with the removal of the TP exemption for medium-sized enterprises, particularly in light of HMRC’s plan to introduce a new general exemption for UK-to-UK transactions. However, the Institute urges HMRC to raise the exemption threshold for small businesses from the proposed £10 million in turnover to at least £15–20 million, to reduce disproportionate administrative burden on lower-risk businesses.
“The threshold adjustment would better target the TP regime at entities posing material transfer pricing risk, without unnecessarily increasing costs for small businesses,” the Institute noted.
Transfer Pricing Documentation and Multinational Reporting
On the second proposal—mandating multinational enterprises (MNEs) to report cross-border related-party transaction data—the CIOT acknowledges the potential value for HMRC in improving risk assessment and audit targeting. However, the Institute stresses the need for clarity and proportionality in implementation, cautioning against duplicative requirements for groups already complying with OECD Country-by-Country Reporting (CbCR) and Master File/Local File standards.
CIOT suggests aligning any new UK-specific documentation rules with international norms to reduce compliance friction for globally operating businesses.
Wider Context: A Shift Toward Transparency and Enforcement
HMRC’s consultation is part of a broader effort to tighten transfer pricing enforcement and reduce base erosion risks, especially involving complex multinational structures. These efforts reflect increasing global alignment on transfer pricing transparency under OECD Pillar One and Pillar Two frameworks.
Tax practitioners and multinational groups operating in the UK should closely monitor the evolving documentation requirements and SME thresholds, as final legislative or policy changes could impact transfer pricing obligations for accounting periods beginning in 2026.
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