HM Revenue & Customs (HMRC) published the Transfer Pricing and Diverted Profits Tax statistics for 2023 to 2024 on 27 January 2025.

HMRC’s transfer pricing rules and Diverted Profits Tax (DPT) ensure multinationals pay the correct tax on UK-generated profits. The latest report summarises transfer pricing yield sources, case settlement trends, and resolution times. It also covers the Profit Diversion Compliance Facility (PDCF), introduced in April 2015. This is elaborated upon in the following paragraphs.

The transfer pricing yield includes additional tax revenue from enquiries (including real-time interventions), Advance Pricing Agreements (APAs), Advance Thin Capitalisation Agreements (ATCAs), and transfer pricing Mutual Agreement Procedure (MAP) cases.

Enquiries – In the 2023 to 2024 period, HMRC reported a transfer pricing yield of £1.786 million, an increase from £1.635 million in the previous year. The number of settled transfer pricing enquiry cases decreased slightly to 128 from 153 in 2022 to 2023, while the average duration to settle these enquiries decreased to 33.1 months from 38.9 months.

APAs – An APA is a formal agreement between a business and HMRC, setting the transfer pricing method for specific transactions over a defined period.

In the 2023–2024 period, HMRC concluded 27 Advance Pricing Agreements (APAs), a notable rise from the 15 finalised in 2022–2023. However, the average time required to finalise these agreements increased to 53 months, up from 45.5 months the previous year.

MAP – Most double taxation agreements feature a MAP to resolve tax disputes through consultation. HMRC’s MAP process is detailed in Statement of Practice 1/2018 and the International Manual.

In the 2023–2024 period, HMRC concluded 86 Mutual Agreement Procedures (MAP), a decrease from the 131 finalised in 2022–2023.

ATCA –An Advance Thin Capitalisation Agreement (ATCA) sets terms for debt financing between connected parties to ensure correct tax in the UK. Like APAs, it allows early agreement on transfer pricing without altering tax obligations.

In the 2023–2024 period, HMRC finalised 10 Advance Thin Capitalisation Agreements (ATCAs), up from 5 in 2022–2023.

The Profit Diversion Compliance Facility (PDCF)

Launched in January 2019, HMRC’s PDCF targets multinationals suspected of diverting profits from the UK.

PDCF has proven successful, with many multinationals choosing to use it proactively.

DPT –DPT targets companies using contrived arrangements to minimise tax liabilities, encouraging compliance, or facing higher tax rates.

The DPT net amount refers to the DPT collected during the year that has not been refunded. If DPT is repaid, it typically follows a transfer pricing enquiry, where additional corporation tax is paid.

When HMRC believes DPT is due, it first issues a preliminary notice. Companies have 3 months from their accounting period’s end to notify HMRC if they might be within the scope of DPT. HMRC then has 2 years to investigate.

Way forward

With increasing disputes and heightened scrutiny from HMRC, UK multinational corporations must carefully adhere to Transfer Pricing strategies to avoid severe consequences. KNAV provides expert guidance to help businesses navigate the complexities of Transfer Pricing regulations, ensuring strict compliance and reducing the risk of HMRC penalties. By aligning with HMRC’s stringent requirements, KNAV advises companies in preventing costly disputes and minimising exposure to TP assessments.