Jul 31

2026

The 2026 transfer pricing overhaul: what cross-border businesses in the UK and Ireland need to know

The UK’s transfer pricing rules changed for accounting periods beginning on or after 1 January 2026, while Ireland’s core regime remained unchanged. The practical position for smaller groups is therefore less dramatic than some headlines suggest: most qualifying small and medium-sized enterprises remain outside the transfer pricing rules in both jurisdictions, although exceptions and group-level tests still matter.

The UK reforms were enacted through the Finance Act 2026. A separate reporting requirement, the International Controlled Transactions Schedule, is intended to apply for accounting periods beginning on or after 1 January 2027. Its detailed regulations had not been finalised by 31 July 2026. Our guide to cross-border businesses in 2026 provides wider context for groups operating between the two countries.

What transfer pricing means

Transfer pricing governs transactions between connected parties, such as sales of goods, management services, royalties and intra-group loans. Where the rules apply, taxable profits must be calculated using the arm’s length principle: the terms should reflect those that independent parties would have agreed in comparable circumstances.

Poorly supported pricing can lead to tax adjustments, interest, penalties and double taxation. A cross-border accounting and tax review can help identify where the UK and Irish positions differ.

The position at a glance

What changed in the UK

The reforms simplify several areas, including the participation condition, transactions involving intangible assets and the treatment of many wholly domestic transactions. Diverted Profits Tax has been repealed and replaced by a Corporation Tax charge on unassessed transfer pricing profits, providing access to tax-treaty procedures intended to address double taxation.

The government considered removing the exemption for medium-sized enterprises but decided to retain the existing SME exemption. However, exceptions remain, so meeting the size thresholds does not always end the analysis.

The International Controlled Transactions Schedule is a reporting requirement rather than a new pricing rule. In-scope businesses will report specified cross-border related-party transactions for HMRC’s risk assessment. Transactions covered by the SME exemption will generally not need to be reported unless the permanent-establishment condition applies.

The HMRC technical consultation closed on 31 July 2026. Businesses should therefore not treat every proposed threshold, field or penalty arrangement as final until the regulations and HMRC notice are published.

Where the SME thresholds stand

Both countries use definitions based broadly on the EU SME recommendation. The test considers staffing and either turnover or balance-sheet total, with group and certain linked-enterprise figures included.

In Ireland, legislation provides a framework for bringing SMEs into the rules by ministerial order. If commenced, small enterprises would have no transfer pricing documentation requirement, while medium-sized enterprises would have reduced obligations for specified transactions. As at 31 July 2026, that commencement had not occurred.

How growing groups should prepare

Map every cross-border dealing, test size at group level and record how material prices were determined. Businesses approaching the thresholds should not wait for an enquiry to reconstruct agreements, functions, risks and pricing evidence. Reliable management accounts can help reconcile transfer pricing policies with actual results.

Where records are incomplete, forensic accounting support may be needed to rebuild the transaction history. An SME business solutions team can also incorporate proportionate controls into ordinary financial reporting.

For advice on current obligations, speak to SCC Chartered Accountants. Its cross-border accounting and tax specialists can review group structure, pricing and documentation, while the recovery and restructuring team can assist where disputes or financial pressure form part of the wider position.