Plain English
The UK follows the OECD framework closely but layers on its own statutory mechanics: legislation in TIOPA 2010, an SME exemption for smaller groups, a specific requirement (since 2023) for large businesses to keep a 'summary audit trail' evidencing how their documentation was prepared, and HMRC's own audit and diagnostic-of-risk approach through its Profit Diversion Compliance Facility and large business risk reviews.
Technical definition
The UK transfer pricing regime under Part 4 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010), which requires related-party transactions to be priced in accordance with the arm's length principle consistent with the OECD Transfer Pricing Guidelines, incorporates an SME exemption, applies mandatory master file and local file requirements for large businesses (broadly aligned to the EUR 750m CbC threshold) since April 2023, and requires a summary audit trail questionnaire to be retained alongside the local file.
Why it matters
The UK is one of the largest economies to have both a mature transfer pricing enforcement track record and specific procedural requirements (the summary audit trail, Profit Diversion Compliance Facility) that differ meaningfully from generic OECD-aligned practice elsewhere.
How it works in practice
- 01Determine whether the SME exemption applies based on consolidated group size.
- 02For large businesses, prepare a master file and local file consistent with BEPS Action 13, retained (not automatically filed) but producible on HMRC request.
- 03Complete the summary audit trail questionnaire evidencing the documentation preparation process, mandatory since accounting periods beginning on or after 1 April 2023.
- 04Apply the arm's length principle per TIOPA 2010, s147, cross-referencing OECD Guidelines as the interpretive standard under s164.
- 05Engage HMRC's Profit Diversion Compliance Facility proactively where diverted profits tax exposure is identified.
Worked example
A large UK group's documentation obligation
A UK-headquartered retail group with consolidated global turnover of GBP 900m must, from its accounting period starting April 2023, maintain a master file and local files for its material intercompany transactions in the specific OECD-prescribed format, and complete a summary audit trail confirming who prepared the documentation, what data sources were used, and when benchmarking was last refreshed. HMRC does not require these documents to be filed automatically with the tax return, but must be produced within 30 days of a formal request — a much tighter turnaround than the multi-month preparation cycle many groups previously assumed they had.
Common mistakes
- Assuming the master file/local file requirement applies to all UK businesses rather than only those above the large business threshold.
- Treating the summary audit trail as a formality rather than a substantive procedural record HMRC actively reviews.
- Missing the interaction between transfer pricing exposure and the UK's separate Diverted Profits Tax regime.
Audit red flags
- No summary audit trail completed despite exceeding the large business threshold.
- Local files that could not realistically be produced within HMRC's 30-day request window.
- Persistent low margins in a UK entity alongside high-value UK-based functions, a classic Diverted Profits Tax risk indicator.
Documentation & data
Documents to hold
- Master file and local file per BEPS Action 13 format.
- Summary audit trail questionnaire.
- Group size calculations confirming SME exemption status or large-business obligations.
Data you need
- Consolidated group turnover, balance sheet and headcount for threshold testing.
- UK entity-specific transaction and functional data.
- Prior HMRC correspondence or risk review outcomes.
Who owns this internally: UK in-house tax team, often supported by UK-specific external advisors for the summary audit trail and HMRC engagement.
Jurisdiction notes
- United Kingdom
- TIOPA 2010 Part 4 is the core statute; HMRC's International Manual provides detailed administrative guidance.
- Ireland (for comparison)
- Also aligns closely to OECD standards but with its own master file/local file thresholds distinct from the UK's.
Notes by role
Advisors & consultants
The summary audit trail is a distinctly UK requirement — do not assume a client's non-UK documentation process automatically satisfies it.
In-house tax teams
Build the 30-day HMRC production window into internal documentation retention practice, since 'available on request' is a much higher bar than 'preparable in due course'.
Frequently asked
- When did the UK master file/local file requirement start?
- It became a formal legal requirement for accounting periods beginning on or after 1 April 2023, though many large groups had already prepared equivalent documentation voluntarily.
- What is the summary audit trail?
- A short questionnaire, required alongside the local file for large UK businesses, documenting how and by whom the transfer pricing documentation was prepared.
Sources & status
- Primary source
Taxation (International and Other Provisions) Act 2010, Part 4
UK Government, 2024
- Primary source
HMRC International Manual, Transfer Pricing Documentation
HM Revenue & Customs, 2023
- Primary source
OECD Transfer Pricing Guidelines, Chapter V
OECD, 2022
Reference material only, not advice on a specific fact pattern. Reviewed 2026-06-30.
Careers
How this shows up in the job
UK-specific transfer pricing expertise, particularly around the summary audit trail and Diverted Profits Tax interaction, is a distinct and marketable specialism within UK-based advisory and in-house roles.
Careers in transfer pricing