The international controlled transactions schedule consultation

HMRC has published a further technical consultation on the final details of the introduction of a requirement for large businesses to file an international controlled transactions schedule (ICTS). The technical consultation invites views on draft regulations to implement the requirement, a draft ICTS reporting template and an HMRC Notice which specifies much of the required detail and has the force of law (so-called tertiary legislation).

It is expected that the ICTS provisions will come into effect for accounting periods beginning on or after 1 January 2027 with the first reports due by 30 September 2028 using the online template provided by HMRC. Affected businesses should take this opportunity to engage with this technical consultation. Simmons & Simmons will be responding to the consultation and are happy to discuss any concerns you may have with the current proposals and feed these into our response.

Background

The UK government first floated the idea of introducing a formal reporting schedule for cross-border related-party dealings in 2021 (when it was initially explored as an "International Dealings Schedule"). Although the government eventually shelved that idea at that time, the concept was revived in the Corporate Tax Roadmap and then consulted on during Spring 2025. The government then confirmed in the 2025 Autumn Budget its intention to introduce the new annual filing requirement for in-scope multinational businesses in the form of the International Controlled Transactions Schedule (ICTS). Legislation was included in Finance Act 2026 to enable HMRC to bring forward regulations to give effect to the ICTS and now HMRC is carrying out a technical consultation on the detail of those regulations and an accompanying HMRC Notice.

The consultation makes it very clear that the ICTS aims to meet a need which is not met by existing transfer pricing documentation requirements (i.e. the Country-by-Country Reporting schedule introduced in 2016 and the Master File and Local File requirement introduced in 2023 in the UK). Specifically, the information included in the ICTS will be used for automated, data led risk assessment and manual risk identification. The intention is that it will enable HMRC to reduce the number of enquiries opened on businesses with limited transfer pricing risk and better target higher risk arrangements (for example, entities identified as low-risk yet reporting persistent losses). This targeted approach is intended to benefit compliant taxpayers by improving efficiency and fairness.

HMRC's intention with the ICTS is not to introduce an additional transfer pricing obligation or duplicate existing compliance requirements, but rather to require the submission of information that should already be available within a robust transfer pricing local file in a format which facilitates data analysis using third party software (an investment of £6m from HMRC). It is expected to generate an extra £350m per annum for the Exchequer by 2030/2031.

Nevertheless, the introduction of the ICTS could be viewed as one of the most significant requirements for the mandatory submission of transfer pricing data to HMRC ever introduced for affected taxpayers.

What is the ICTS?

The ICTS will apply to UK resident businesses within the scope of transfer pricing legislation (which currently excludes SMEs), UK resident businesses with foreign permanent establishments and foreign businesses with a UK permanent establishment. HMRC estimates the ICTS could apply to approximately 75,000 businesses.  

The ICTS will capture specific factual information about relevant cross-border related party transactions in a standardised format. The information required for submission includes details typically found within a transfer pricing local file although some of the information particularly around valuation of intangibles could be seen to go beyond what is required in the local file.  

Who will need to report?

In principle, all businesses within the scope of UK transfer pricing rules will be subject to the ICTS requirement. However, the rules introduce an additional threshold requirement that needs to be met before an ICTS requirement arises. This threshold requirement is set out in HMRC's Notice and is that either:

• There is at least one transaction with a non-qualifying territory (a non-qualifying territory is any country or jurisdiction that does not have a comprehensive Double Taxation Treaty (DTT) with the UK that includes an appropriate non-discrimination clause); or
• There are one or more transactions with a resident of a qualifying territory with an aggregate total value of £1m or more.

The international controlled transactions which need to be reported on the ICTS are referred to as Specified International Controlled Transactions (SICTs), subject to thresholds outlined in the draft HMRC Notice (see further details below). The notice provides an exception for providing the specified information where it relates to a case specified in a notice published by the Commissioners or where the specified information has been provided to HMRC by another reporting entity. In this case, the entity only needs to submit certain factual details about the reporting entity as referred to in paragraph 6.2.1 of the draft HMRC Notice.  

Businesses outside the scope of UK transfer pricing, such as small and medium sized businesses, will not be required to report on the ICTS.

What information will be required?

Regulation 10 sets out the information to be reported in combination with the HMRC Notice. This broadly includes information under the following categories:

• Information identifying details of the transaction and counter-party
• Profit attribution analysis
• Related financing arrangements
• TP analysis
• Copies of any books, documents or other records listed by HMRC.

However, this is heavily supplemented by HMRC's Notice (with the detailed requirements having the force of law). In particular, the Notice distinguishes between high and lower value transactions, with more detailed information required for the former. Higher value transactions are either those with a value of £1m (where the group is subject to CbC reporting) or £100,000 (in other cases).

Transactions covered by an in-force Advance Pricing Agreement (APA) are exempted from the reporting requirement.

Transactions that have been confirmed as low risk under the International Compliance Assurance Programme (ICAP) are not exempt. However, where transactions are deemed low risk under ICAP, it is not anticipated that compliance resources will be dedicated to further review for a two-year period. The government is considering whether an exemption from reporting would be appropriate within the 2-year period where a low-risk rating has been given under ICAP and welcomes views on this question.

What has changed in the ICTS template compared to the 2025 version?

In response to the comments during the previous consultation on the template in 2025, HMRC has sought to simplify the requirements by:

• Allowing aggregation for similar transactions provided the transfer pricing method, relevant percentage metrics (e.g. profit margin or mark-up on costs) and underlying comparables (where relevant) are consistent.
• Disclosure of the top 5 debits connected with loan relationships (e.g. based on greatest interest expense) and top 5 creditor relationships (e.g. largest balance sheet value)

Where transactions cannot be aggregated, they need to be disclosed on separate lines.

The detail required for each transaction disclosed remains high including presenting accounting income and expense for each transaction in GBP (requiring conversion if the functionally currency differs). In addition, there is a new template with granular detail on valuations where a transfer of intangibles have been undertaken which includes details on the components of the discount rate (e.g. risk free rate, beta, equity risk premium) and the weighted average cost of capital in the case of a discounted cash flow methodology applied. The supplementary information schedule also asks the basis for preparation of the forecasts for the valuation and whether it was considered as a hard to value intangible.

Details about the inclusion of share based payments and defined benefit pension costs in the cost base for any transfer pricing methodologies applied, whether there were business restructurings and changes in transfer pricing policy during the year are also requested in the supplementary information schedule further enhancing the level of qualitative information required by taxpayers.

For financial services businesses, there is a separate template to take into account the unique nature of regulation and transaction types in the industry. In particular, it covers the disclosure of international controlled transactions where the following conditions are met:

• a business has SICTs within activity group(s) in the 'trading and sales' business line outlined in the Basel II framework
• multiple comparability analyses have been used to price supplementary international controlled transactions associated with a particular activity group

There is also a separate schedule reporting loan relationships constituting an issuance or holding of additional tier one or tier two regulatory capital.

How must information be reported?

The regulations allow HMRC to specify the form and manner of reporting of required information and this is again set out (with the force of law) in the HMRC Notice. The Notice provides that the specified information must be provided electronically [via a prescribed form], though a non-electronic method may be allowed on application to HMRC in some cases. The [prescribed form] is also part of the consultation with HMRC having provided a draft of the ICTS Template 2026.

The HMRC Notice also specifies when the information must be provided. For example, for a UK resident company the submission deadline will be 30 September 2028 for accounting periods beginning on or after 1 January 2027 and ending on or before 30 December 2027.

Penalties, appeals and enforcement

Part 3 of the draft regulations deal with the administrative elements of the new rules. This includes providing for penalties for late filings (£300) failures to report and for inaccurate information (£3,000), subject to a defence of reasonable excuse. HMRC has indicated that it expects to provide a "soft-landing" for penalties for the first period of filings through its interpretation of what constitutes a reasonable excuse. Account will be taken of businesses needing time to adjust to the new filing requirement. Further guidance on the soft-landing period will be provided in advance of implementation.

Comments

The technical consultation is open until 31 July 2026 and responses should be sent to tp_scope_and_documentation@hmrc.gov.uk

The introduction of the ICTS reporting requirement is a significant development and will undoubtedly increase the administrative burden for affected businesses. It will therefore be important for all affected businesses to engage with this consultation. Indeed, many businesses may lack the necessary systems capable of generating the necessary data to complete the ICTS template as contemplated and it will be important for those businesses to assess their needs in advance of the rules coming into force in 2027.