Key Insights from HMRC's 2023-2024 Transfer Pricing and Diverted Profits Tax Statistics

On January 27, 2025, HM Revenue and Customs (HMRC) released the latest statistics on Transfer Pricing (TP) and Diverted Profits Tax (DPT) for the 2023-2024 tax year. These figures underscore the UK's ongoing commitment to ensuring that multinational enterprises (MNEs) allocate profits appropriately to their UK operations. Below, we unpack the implications of these statistics and provide actionable guidance for businesses operating in the UK and beyond.

 

Transfer Pricing Yield

The TP yield from HMRC interventions continues to rise, reflecting enhanced compliance efforts:

• 2022-2023: GBP1,635 million
• 2023-2024: GBP1,786 million

In our experience HMRC TP audit efforts remain focused on high-risk areas such as intangible asset transactions (and related R&D services), financial transactions, management and service fees, and complex global supply chain arrangements.

 

Advance Pricing Agreements

• Advance Pricing Agreements (APAs) continue to play a significant role in providing certainty to taxpayers:
• From April 1, 2018, to March 31, 2024, there were 207 APA applications in HMRC’s portfolio.
• 45 new applications and 27 new APAs were agreed in the 2023-2024 tax year. The 45 applications were the joint highest on record with last year.
• This aligns with what we see in the market with our clients seeking certainty on material and complex transactions.
• The average time to reach APA agreement during 2023-2024 increased to 53 months. In our experienced APA timings vary depending on the complexity and materiality of the transactions at stake, as well as how proactive and prepared clients are to in sharing information to accelerate the process.

 

Mutual Agreement Procedures

• Mutual Agreement Procedures (MAPs) remain a key and useful mechanism for resolving double taxation disputes under the UK’s tax treaties. Despite a decline in the number of cases resolved and admitted, MAP continues to be an essential tool for taxpayers seeking relief from double taxation.

• 2023-2024 activity:
• 86 cases were resolved, reflecting a decrease from previous years.
• The average resolution time for transfer pricing MAP cases was 28.8 months.

• While the number of resolved cases has declined, this does not reflect a diminishing reliance on MAP in practice. Many MNEs continue to actively pursue MAP as a critical means of achieving sensible and pragmatic resolutions to disputes. Given the increasing complexity of cross-border tax matters, MAP remains an important right for taxpayers.
• HMRC continues to support the timely resolution of MAP cases, but business should be prepared for potential challenges in navigating negotiations.

 

Diverted Profits Tax Yield

• DPT, designed to address profit diversion, directly contributed GBP108 million in 2023-2024 through DPT charging notices, a significant increase from GBP40 million in 2022-2023. This 170% year-on-year rise reflects HMRC’s continued focus on preventing artificial profit shifting.
• However, when compared to the total transfer pricing yield of GBP1.786 billion in 2023-2024, DPT accounts for 6% of HMRC’s total TP-related compliance yield. While this demonstrates that DPT remains an important tool in HMRC’s enforcement strategy, its relative weight has declined compared to previous years.
• The figures suggest that HMRC is increasingly prioritising traditional TP audits and the Profit Diversion Compliance Facility (more detail about this here) over DPT assessments, focusing on adjustments to intercompany pricing rather than direct DPT cases. Nonetheless, businesses should remain vigilant, particularly where structures involve UK provisions with a low tax territory, as HMRC continues to scrutinise arrangements that could trigger DPT exposure.

 

What This Means for Multinational Enterprises

• These statistics demonstrate HMRC’s continued focus on TP, DPT and related international tax issues. MNEs should consider the following steps to mitigate risk and ensure compliance:
• Prepare robust documentation: Ensure that TP policies align with the arm’s length principle, maintain clear records, and be prepared to justify intercompany pricing arrangements during audits.
• Engage early with HMRC: Utilising APAs, MAPs and ATCAs can provide certainty and reduce the risk of disputes.
• Monitor compliance: Proactively reviewing intercompany transactions and financing arrangements can help businesses identify potential risks before they become audit issues. With HMRC intensifying its scrutiny, ongoing compliance monitoring is crucial.

• For a comparison with last year’s HMRC figures and insights into trends in APA and MAP stats, see our previous analysis here.

 

Contact Us

Our tax advisory team is here to help you navigate these updates and ensure compliance with HMRC’s evolving expectations. Please get in touch for further information.