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Navigating UK-to-UK Transfer Pricing Reforms: New Exemptions & Practical Tips for Corporates

From 1 January 2026 UK-resident companies have greater exemptions from transfer pricing for domestic transactions—but specific criteria apply and elections may be needed.

By NomadicTax Research Team • 5-8 min read • June 4, 2026

## Introduction The UK has reformed **transfer pricing rules** under Part 4 of the Taxation (International and Other Provisions) Act 2010 (TIOPA10) to reduce compliance burdens on domestic transactions. A significant **UK-to-UK exemption** now exists for many related-party exchanges between UK companies, effective for chargeable periods beginning **on or after 1 January 2026**. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/international-manual/intm414320?utm_source=openai)) ## What’s Changed - **UK-to-UK provisions** are exempt from transfer pricing rules under TIOPA10/S164A if certain qualifying criteria are met. This means many domestic transactions no longer need the same arm’s length adjustments as cross-border ones. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/international-manual/intm414320?utm_source=openai)) - Reforms also updated participation and valuation rules for cross-border intangible transactions (effective 1 January 2026). For intangible asset transfers or licences, **arm’s length pricing** applies; for other cases, **market value** is used. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/international-manual/intm414020?utm_source=openai)) ## Qualifying for the UK-to-UK Exemption To fall into the exemption, all the following must apply during the relevant period: - Both the **potentially advantaged company** and the other party are UK-resident companies throughout the period. - The provision influences profits or losses for both entities, and any profits are subject to **UK corporation tax**—on the same rate for both. - The entities use **same reference currency** in accounting (normally their functional currency). ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/international-manual/intm414320?utm_source=openai)) Disqualifying factors include: - Inclusion of contract types specified under CTA09/S589 for only one entity - Exemption adjustments regarding foreign permanent establishments - Patent Box provisions or excluded companies - If either party elects out or HMRC issues a mandatory transfer pricing notice due to potential UK tax loss. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/international-manual/intm414320?utm_source=openai)) ## What Corporates Should Do Now - **Review existing inter-company transactions** to determine if they meet qualifying criteria to claim the exemption - **Consider making an election** to apply transfer pricing rules even when exempt, especially if future reorganisations might invalidate the exemption - **Maintain detailed documentation** to prove qualifying status (UK residency, same tax rates, currency). - For intangible transactions, assess whether arm’s length valuation or market value is needed depending on the nature of the transaction. - Regularly check updates to HMRC internal manuals like INTM414020 and INTM414320. ## Example Company A and Company B are UK resident, taxed at the same corporation tax rate, and transact goods where both recognise profits in their financials using GBP. This transaction could fall under the UK-to-UK exemption. However, if Company B holds a foreign branch with different tax treatment or currency, the exemption might not apply. ## Impact and Risks **Impact:** - **Reduced compliance costs** for wholly domestic corporations - **Easier budgeting and transfer pricing disclosure burdens** lowered for many UK-only relationships **Risks:** - Misapplying the exemption if any criterion is missed—including subtle ones like currency or tax rate differences - If HMRC issues a notice, you may need to revert to full TP rules - Poor documentation could lead to disputes or adjustments in tax assessments ## Summary As of 1 January 2026, UK-to-UK transfer pricing reforms offer meaningful relief for many domestic related-party transactions—but the exemption is conditional. Corporates should **audit their group structure**, align valuation practices, and ensure documentation lines up with qualifying criteria to make the most of the opportunity.