Countdown to the International Controlled Transactions Schedule – how UK businesses can prepare for new transfer pricing reporting requirements

With the rise and rapid adoption of advanced data analytics and AI tools, transfer pricing compliance and risk assessment is quickly shifting from being a documentation-focused process to a near real time, data-driven one.

HMRC are fully embracing this change, with the confirmation that UK businesses will soon be required to file a new International Controlled Transactions Schedule (ICTS) for almost all cross-border transactions with related parties.

The level of detail demanded by the ICTS is set to create a significant compliance burden, especially for businesses whose systems are not yet equipped to deliver transfer pricing data to the level of granularity needed for completing the ICTS.

With the ICTS filing requirement expected to take effect for accounting periods beginning on or after 1 January 2027, UK businesses have only a narrow window to assess their readiness and implement any necessary changes.

What is the ICTS?

The ICTS is a prescribed schedule that captures data on cross-border transactions. HMRC released a draft version of the ICTS during its Spring 2025 consultation on transfer pricing reforms. While the draft was shared in Excel format, HMRC is expected to roll out a secure online platform for the actual filings.

As an indicative summary, the data taxpayers will likely need to provide includes (but is not limited to):

• the counterparties to the transaction and their country of incorporation/residence;
• the type of transaction (e.g. sales and marketing services);
• the transfer pricing policy applied (e.g. cost plus);
• the pricing applied (e.g. percentage mark-up on costs);
• the quantum of the transaction overall; and
• there are also likely to be separate sections of the ICTS to capture information on intragroup loan arrangements, acquisition and sales of assets.

This list is not exhaustive but highlights the level of detail expected under the ICTS.

Who will be in scope of the ICTS filing rules?

Small and medium-sized enterprises are still exempt from UK transfer pricing documentation rules and the ICTS regime. Notwithstanding this exemption, many businesses are still expected to fall under the scope of the new ICTS filing requirements with HMRC estimating that around 75,000 taxpayers will be affected.

Entities in scope are expected to be UK-resident businesses (or UK permanent establishments) with aggregate cross-border transactions above a specified threshold (£1m was suggested in the Spring 2025 consultation).

For those required to file, HMRC is considering a de minimis threshold of £100,000 for individual categories of transactions. HMRC are also contemplating allowing for a higher threshold for large businesses (those with revenues of €750m or more) that already prepare a Master File, UK Local File(s), and Country-by-Country Reports.

When will the new filing requirement come in?

Further technical consultations on the final form of the ICTS are planned for Spring 2026, but the ICTS filing requirement is expected to apply for accounting periods beginning on or after 1 January 2027. Annual filings will be required for each year thereafter.

Our key insights

The new ICTS filing requirement is arguably one of the most significant changes to UK transfer pricing reporting in recent years.

While Country-by-Country Reporting and additional requirements for Master File and Local File documentation were introduced in 2023, these applied only to the largest businesses (those with revenues of €750m and above), many of whom were already preparing such documentation to meet compliance requirements in other jurisdictions.

The ICTS itself is not a new concept. Its original iteration, the International Dealings Schedule (IDS), was first explored by HMRC in 2021. At the time, the IDS was not adopted due to criticism that it duplicated data already available in transfer pricing local files, creating unnecessary additional compliance burden for taxpayers. Additionally, it failed to capture the nuances of transfer pricing arrangements, leading to fears that taxpayers could be mislabelled as high risk. It is also noted that similar reporting requirements have long been implemented in countries such as Australia, Belgium and Denmark.

What has changed in recent years is the proliferation and mass adoption of sophisticated AI and data analytics tools.

No doubt many of the same limitations that affected the original IDS remain; in particular, any fixed transactional reporting format is unlikely to capture all the detail and nuance needed for a full transfer pricing risk assessment. However, with the support of AI analytics, the clear trade-off and attraction for HMRC is that the ICTS will provide HMRC with a means to identify areas of tax risk at scale and on a near real-time basis.

HMRC has already invested in its “Connect” system, which links an estimated six billion data points on taxpayers¹. The new ICTS filing requirement will further expand HMRC’s databank, reinforcing the shift towards automated, data‑driven tax risk assessments. It will also give HMRC additional data to track and forecast trends in the UK tax base.

The above is very much in line with the UK Government’s wider “closing the tax gap” strategy, which aims to:

• expand the use of AI to target compliance activity, overhauling legacy IT infrastructure, and investing heavily in new data capabilities and platforms, giving HMRC a clearer, near real-time view of taxpayers’ affairs and compliance risks; and
• recruit 5,500 new compliance officers, equipped with improved tools and training, to identify those at risk of non-compliance over the next five years.

Most transfer pricing documentation and filing initiatives, whilst burdensome, are relatively benign. However, it is telling that HMRC expects the ICTS to significantly enhance its ability to detect transfer pricing risks and, moreover, to increase tax revenues. The UK Treasury anticipates that the ICTS will generate a cumulative additional tax yield of £875m between January 2027, when the ICTS first takes effect, and March 2031.

It also remains to be seen the extent to which the new data collected through the ICTS will be shared with other tax authorities.

What needs to be considered now?

It is important to remember that preparing for the ICTS is not just about compliance - it's also a chance for businesses to identify and address transfer pricing risks before HMRC comes knocking.

In our experience, many businesses lack systems capable of generating transfer pricing data at the level of detail required for the ICTS. However, with the new rules coming into effect from 1 January 2027, there is a window for businesses to prepare for the new ICTS filing requirement. Our recommended next steps include the following.

• Assessing whether your existing systems can produce the transfer pricing data required (even though the ICTS is not yet final, use the draft as a benchmark to test your system capabilities).
• Identifying any data or system gaps and take action to address them.
• Reviewing and analysing the data you have collected, ensuring it is consistent with other transfer pricing documentation (such as CBCRs, Master Files, Local Files, and other local transfer pricing submissions). Also, cross-checking for other tax risks, such as consistency with other filings and declarations on relevant affected cross-border transactions.
• Proactively resolve any transfer pricing or other tax risks identified before submitting your first ICTS report.
• Large businesses should also consider how observations from completing the ICTS aligns with their wider group compliance strategy, and whether they should discuss any findings from the ICTS in business risk review meetings with their designated compliance manager.

In addition to the above, businesses still have the chance to voice their thoughts on the final form of the ICTS by providing feedback (either directly or through their tax advisers) during the technical consultation planned for Spring 2026.

¹ Source: CIOT: Tax technology podcast series: How data is used at HMRC? Insights with Simon York CBE