What is ICTS?
ICTS is a new annual transfer pricing (TP) reporting requirement, intended to apply for accounting periods beginning on or after 1 January 2027. It will require UK businesses to report specified cross-border related-party transactions to HMRC in a standardised format. This includes details of the TP methodology adopted, the profit level indicators used, the mark-ups or margins applied, and a range of qualitative disclosures.
Why is this important?
HMRC is taking a significant step towards more data-led TP compliance. The ICTS requirement is designed to provide HMRC with structured information on cross-border related-party transactions and permanent establishment dealings before an enquiry is opened.
By collecting standardised information on cross-border related-party transactions, HMRC will be better equipped to identify potential transfer pricing risks and target its enquiries more effectively, while reducing unnecessary enquiries for businesses that present a lower TP risk profile.
Who will be impacted?
HMRC’s materials indicate the measure could affect around 75,000 businesses. This is likely to include:
- UK companies that are subject to the UK transfer pricing rules and have cross-border transactions with related parties.
- UK companies with overseas permanent establishments.
- Non-UK companies with a UK permanent establishment.
- Businesses with cross-border arrangements involving services, royalties, financing, distribution, procurement, IP or business restructurings.
What businesses need to know regarding the new ICTS requirements?
Firstly, annual transfer pricing disclosures are not a new concept. Tax authorities in many jurisdictions, including Brazil, India, China, France and Spain, have for many years required taxpayers to provide information on related-party transactions annually, either through dedicated transfer pricing forms, or corporate income tax disclosures.
The UK’s proposed ICTS regime should therefore be viewed as part of a broader global trend towards greater transparency and more data-driven transfer pricing compliance.
Importantly, the good news is that HMRC has stated that it intends to make maximum use of work businesses are already undertaking to comply with existing transfer pricing documentation requirements. For larger multinational groups with consolidated revenue exceeding €750 million, and which are already subject to the UK’s formal transfer pricing documentation requirements (Master File and Local File), the new ICTS requirements may be less disruptive. Much of the underlying transfer pricing analysis, factual information and supporting data required for ICTS reporting is likely to exist already and can potentially be leveraged for the new reporting obligation.
The position may be different for many mid-sized groups. While these businesses remain subject to the UK’s transfer pricing rules, they have not historically been required to prepare formal transfer pricing documentation and have often adopted a more proportionate approach to transfer pricing compliance.
As a result, many mid-sized businesses may need to move quickly and act now. The challenge is not simply completing an additional reporting requirement, but ensuring that appropriate transfer pricing policies, robust supporting documentation and reliable financial data are in place to withstand HMRC’s increasingly data-led approach to risk assessment.
Which businesses and transactions may be exempt or outside scope?
While the rules are still subject to consultation and finalisation, the draft materials suggest that certain businesses and transactions may be wholly or partially outside the scope of the ICTS:
| Potential exemption or exclusion
| Current position based on draft materials* |
| Small and Medium sized Enterprise (SME) | Entities that qualify for the UK SME transfer pricing exemption are expected to remain outside the scope. |
| UK only operations/ groups
| Businesses with only UK operations and no relevant cross-border transactions are expected to be outside the scope of the main reporting requirements. |
| Advance Pricing Agreement (APA)
| Transactions covered by an APA are expected to be exempt from certain reporting requirements. |
| Low-value qualifying territory transactions
| No reporting requirement where there are no transactions with non-qualifying territories and aggregate value of transactions with qualifying territories are below £1 million. |
| De minimis thresholds
| Transaction categories below the relevant materiality thresholds may not need to be reported. Current draft thresholds include £100,000 for many businesses and £1 million for Country-by-Country Reporting (CbCR) groups. |
*The consultation process closed on 31 July 2026, and final regulations together with detailed HMRC guidance are expected later in 2026. Businesses should continue to monitor developments closely, as key aspects of the regime, including thresholds, definitions and potential simplifications, may change before the rules are finalised.
Key takeaway
For groups already preparing robust transfer pricing documentation, ICTS is likely to represent an extension of existing transfer pricing compliance processes rather than an entirely new compliance burden.
However, businesses that have historically maintained limited transfer pricing documentation may face a more significant readiness challenge. In particular, they should assess whether their transfer pricing policies, supporting analysis, data collection processes and internal systems are capable of producing the information required for ICTS reporting.
The businesses best placed to manage the new requirements will be those that view ICTS not simply as a filing obligation, but as an opportunity to strengthen transfer pricing documentation and data quality before the regime comes into effect.
How we can help
The introduction of ICTS provides an opportunity for businesses to assess whether their transfer pricing arrangements, documentation and governance processes remain fit for purpose.
Our Transfer Pricing team can help businesses evaluate the potential impact of the new requirements, identify any gaps in existing transfer pricing documentation, and develop practical solutions to support ICTS readiness.
If you would like to discuss how the proposed ICTS requirements could affect your business, please get in touch.
