HMRC transfer pricing yield hits an all time high in FY24-25

These results are consistent with HMRC’s annual report for July 2025, a record £48 billion from compliance activity, up £6.2 billion on the prior year.

Other obsevations

Some further points of interest include:

• Advance Pricing Agreements: Similar numbers of Advance Pricing Agreements (APAs) were agreed compared with recent years and average time to conclude APAs improved to 44 months, the shortest since 2018 to 2019;
• MAP resolution: Performance was strong, with 115 cases concluded in an average of 24.8 months; HMRC have highlighted that they continue to outperform the global average resolution time and comfortably exceeded the global average percentage of transfer pricing Mutual Agreement Procedure (MAP) cases fully eliminating double taxation (91 percent of UK cases fully eliminated double taxation);
• Profit Diversion Compliance Facility: There were fewer new nudge letters and new registrations for the PDCF. 17 cases were resolved indicating that HMRC had largely cleared their inventory of earlier years cases by 31 March 2025. HMRC have issued new PDCF letters and received new registrations since;
• DPT notifications: HMRC received 42 Diverted Profits Tax (DPT) notifications in FY24–25, almost double the average number for the previous four years. This is notable as DPT is due to be repealed and replaced by the Unassessed Transfer Pricing Profits rules, which do not have equivalent notification obligations; and
• Penalties: Penalties relating to TP adjustments are not disclosed in HMRC’s TP/DPT statistics but a report published by the National Audit Office indicates that HMRC Large Business issued 636 penalties in FY25 (vs 164 in FY22) indicating that they are being more assertive in seeking to charge penalties where inaccuracies are identified in the tax returns of large businesses. We are also seeing this in practice on TP enquiries as well as greater use of extended six-year discovery assessments.

There are a number of key elements of HMRC’s strategy and objectives that are relevant for how multinational businesses plan ahead and consider their approach to UK TP compliance:

• HMRC expect to increase compliance yield to from £48 billion to £50.4 billion in FY25-26;
• HMRC intend to recruit 5,500 additional compliance officers with a view to generating an additional £7.5 billion of tax revenue annually by 2029 to 2030. This recruitment includes experienced TP specialists and we have seen HMRC actively recruiting from large advisory firms in the last year;
• HMRC intend to use progress against compliance yield targets as the main measure of success against their new objective of closing the tax gap so we can expect TP compliance yield targets to rise as this will be a key contributor to corporation tax yield;
• Technology modernisation is also a major theme. HMRC are overhauling legacy systems, investing heavily in AI and data analytics, and preparing for the launch of the International Controlled Transactions Schedule (ICTS), which will enable automated TP risk profiling;
• The Guidelines for Compliance on Common Risks in Transfer Pricing Approaches (GfC7) are intended to encourage voluntary compliance. HMRC have surveyed awareness and may place more emphasis on governance during Business Risk Reviews. On‑site governance‑based audits are increasingly being used;
• Taxpayer disclosure is likely to be a key HMRC focus. In FY24–25, 33 percent of large business compliance interventions arose from self-disclosure. HMRC have issued new guidance on how taxpayers should ensure returns are correct and complete and when to disclose uncertainty over tax treatment so taxpayers should expect closer scrutiny of tax return disclosures by HMRC; and
• HMRC have recently developed more detailed guidance around the interaction between the Litigation and Settlement Strategy and MAP. For example, where results are outside the arm’s length range, HMRC expect adjustments to the midpoint (e.g. median), not the edges of the range. This is reducing the scope for pragmatic settlements and reinforces the need to get transfer pricing right in the tax return.

The following actions should be considered:

• UK TP documentation: Ensure UK TP documentation, particularly functional analyses, is sufficiently detailed and up to date, localised and descriptive with respect to control of key risks and DEMPE functions and that there has been an appropriate level of business review and sign off on factual matters. In addition, ensure that UK TP documentation includes proper segmentation to demonstrate profit margins when using the Transactional Net Margin Method (TNMM) and any aggregation of transactions is consistent with the UK TP legislation and OECD Guidelines;
• ICTS readiness: Establish ICTS readiness as part of the wider tax compliance data strategy to ensure the approach taken is efficient and can benefit from the latest technological developments (e.g. AI based risk assessment tools);
• Selecting the TP method: Ensure TP method selection for key transactions is well documented, particularly the process adopted to review for potential internal comparable transactions and the basis for concluding one-sided methods are appropriate where there are significant excess profits or losses from a group perspective;
• Comparables/benchmarking: Revisit the reliability of comparable companies, including whether adjustments should be made to address differences between the tested party and the comparables, and perform sensitivity analysis using adjustments and alternative profit level indicators used by tax administrations to help inform target margins and your approach to year-end adjustments; and
• Complex transactions: If pricing transactions involving the UK is complex due to the presence of senior decision makers performing control of risk functions, current or historical DEMPE activities or business restructuring, then consider the merits of seeking an APA rather than pursuing a file and defend strategy.

Please reach out to one of the authors or your usual KPMG contact if you would like to discuss any of the points raised above or your approach to transfer pricing more generally.

For further information please contact:

• Phil Roper 
• Nick Stevart