During the past year, the UK Government began introducing the necessary legislation to allow HMRC to implement a new requirement for multinational companies to report their cross-border transactions carried out with related parties. This measure is based on the reform of the Corporation Tax legislation published in 2024. 

What is new? 

On November 26, HMRC published a draft proposal for the format and contents of the new obligation. This could be introduced for fiscal years starting on or after January 1, 2027. 

The objective is to obtain and analyze transfer pricing data. In this way, automated risk assessments and more efficient inquiries can be carried out, ensuring that tax inspections focus on specific issues, with shorter and more efficient processes. Furthermore, it will promote greater transparency, fairness, and tax compliance by taxpayers. 

Who is impacted? 

Most likely, the form will affect about 75,000 companies—those with tax residence in the United Kingdom that are currently subject to transfer pricing legislation. On the other hand, it also includes those operating through a foreign permanent establishment (PE), as well as foreign entities operating through a local PE, when participating in cross-border transactions with related parties. These obligations could also have an impact on consultancies, representative bodies, and law firms. 

What data is to be reported? 

Predictably, the government will request the reporting of cross-border transactions carried out between related parties with a total volume exceeding £1 million. These operations will be subject to the reporting obligation, which will likely be conducted on an annual basis and in a standardized format. 

The ICTS Project 

Transactions will be grouped by standardized types: 

• Manufacturing 

• Purchases 

• Sales of finished products 

• Specific services 

• Rentals 

• Franchise fees 

• Royalties 

• Financing 

These categories must be reported whenever the total value per transaction type exceeds £100,000. Likewise, this threshold increases to £1 million in cases where there is an obligation to prepare a Transfer Pricing Local File. However, these transactions will be excluded from said reporting if they are covered by a vaild Advance Pricing Agreement (APA) for the fiscal year analyzed. 

Data to be reported: 

• The data to be reported will identify; 

• The volume of the transaction or transactions; 

• The type; 

• The parties and their jurisdiction of tax residence; 

• The transfer pricing method applied; 

• The profit level indicator; 
• The price or margin achieved. 
• Financial data (income, expenses, book value, or interest received or paid) related to cross-border transactions. 

Additionally, taxpayers must also identify the ultimate beneficial owner, their industry code, currency, and relevant intangible assets, as well as business restructurings and any modifications to transfer pricing policies and/or recent adjustments. 

The specific design and content of the ICTS will be developed through technical consultations and regulations. Thresholds could even be applied to both operating and financial transactions. 

What should taxpayers do? 

Auxadi provides financial and corporate legal services in more than 50 countries to also assist of your multinational or investment fund in the international expansion to the United Kingdom. Therefore, if you wish to expand your network of subsidiaries toward Europe, LATAM, and the United States, please contact us. 

At Auxadi, we offer comprehensive services in accounting, tax, payroll, transfer pricing and corporate legal services to multinationals and funds. With experience since 1979 and a presence in over 50 countries, including 26 proprietary subsidiaries, our advanced technological platform and proven methodology enable us to guarantee efficient management in compliance with local regulations.