The enactment in the UK of the Spring Finance Bill 2023 - which received royal assent in July to become Finance (No.2) Act 2023 (the Act) - brought to a formal conclusion a more than two-year process to update the UK’s transfer pricing documentation requirements, which started in March 2021 with the release of a public consultation document. In response, various proposals have been put forward; some have been included in the new legislation, and others have been put on hold or noted for further consultation in the near future.
In essence, the new rules bring the UK transfer pricing documentation requirements more aligned with the Organisation for Economic Co-operation and Development (OECD) model for documentation, developed under Base Erosion Profit Shifting (BEPS) Action 13. The maintenance of OECD format Master File and Local File documents has been added to existing Country-by-Country Reporting (CbCR) requirements for large groups — i.e., those which meet the CbCR global turnover threshold of EUR 750 million (MNE CbCR threshold). The OECD Guidelines are directly referenced to establish the format and content of the records that now will be required by law.
The effective date is set by reference to the taxpayer’s accounting period, with the new rules applying to accounting periods beginning on or after 1 April 2023 for corporation tax. For income tax, the rules will start to apply from 6 April 2024.