This Practice Note looks at the UK’s transfer pricing legislation applicable to loans, guarantees and other financing arrangements as it applied prior to the reforms introduced by Finance Act 2026—ie it covers the rules generally applicable to accounting periods beginning before 1 January 2026, although note that the Finance Act 2026 commencement provisions contain certain transitional rules for existing loans. For the post-Finance Act 2026 rules and more information on the commencement provisions, see Practice Note: Transfer pricing—loans and guarantees (post 1 January 2026). As more fully discussed in Practice Note: Transfer pricing—key concepts and principles, ‘transfer pricing’ refers to the pricing of goods, services, funds, and tangible/intangible assets provided between connected parties—broadly, companies who are affiliated in some way (note that the participation condition is the relevant test of connection in the UK’s transfer pricing rules). Due to the connection between the parties, transactions between them (often known as ‘controlled’ transactions) may not be subject to normal market pressures which establish prices for similar transactions

STOP PRESS relating to UK transfer pricing legislation: Finance Act 2026 introduced wide-ranging reforms to the UK’s transfer pricing legislation. These included removing UK-to-UK transfer pricing (subject to exclusions, in order to prevent opportunities for tax arbitrage), amending the participation condition, clarifying that the OECD Model Tax Convention and OECD Transfer Pricing Guidelines are interpretative aids, and make several changes to the provisions governing financial transactions to better align the UK rules with the OECD Transfer Pricing Guidelines. Most of the changes took effect for accounting periods beginning on or after 1 January 2026, although the amendments relating to financing transactions have their own commencement and transitional rules. This Practice Note discusses the UK transfer pricing considerations that typically arise on a UK-based private equity buyout transaction. What is a private equity buyout? The UK Private Capital association (formerly the BVCA) defines private equity as ‘finance provided in return for an equity stake in potentially high growth unquoted companies’. The acquisition of a business by way of a buyout (management buyout or secondary buyout etc) is one of the

FORTHCOMING CHANGE relating to UK transfer pricing: At Budget 2025, the government announced that it would be proceeding with a requirement for in-scope multinationals to report information annually on cross-border related party transactions for accounting periods beginning on or after 1 January 2027. A consultation on this measure had run from April to July 2025. (See News Analysis: Budget 2025—Tax analysis—International.) The technical regulations for this new ‘International Controlled Transactions Schedule’ (ICTS) were published for technical consultation on 16 June 2026, along with a draft ICTS notice and template illustrating the information that would need to be filed. The consultation closes on 31 July 2026. Finance Act 2026 (FA 2026) made a series of changes to the UK's transfer pricing legislation which have effect, broadly, for accounting periods beginning on or after 1 January 2026. The FA 2026 amendments governing financing transactions have their own commencement and transitional rules. Because of the significant nature of the reforms, this transfer pricing subtopic covers the pre- and post-1 January 2026 positions in separate Practice Notes. At a few places

FORTHCOMING CHANGE relating to UK transfer pricing: At Budget 2025, the government announced that it would be proceeding with a requirement for in-scope multinationals to report information annually on cross-border related party transactions for accounting periods beginning on or after 1 January 2027. A consultation on this measure had run from April to July 2025. (See News Analysis: Budget 2025—Tax analysis—International.) The technical regulations for this new ‘International Controlled Transactions Schedule’ (ICTS) were published for technical consultation on 16 June 2026, along with a draft ICTS notice and template illustrating the information that would need to be filed. The consultation closed on 31 July 2026. This Practice Note looks at the UK’s transfer pricing legislation following the changes made by Finance Act 2026 (FA 2026). FA 2026 introduced a number of changes to the UK’s transfer pricing legislation with the stated aims of simplifying the rules, addressing legislative weaknesses, and more closely aligning the rules to international standards. Most of the changes took

This Practice Note looks at the key provisions of the UK’s transfer pricing legislation that applied prior to the reforms introduced by Finance Act 2026—ie it covers the rules generally applicable for accounting periods beginning before 1 January 2026 (subject to certain Finance Act 2026 transactional commencement rules that apply to loans existing at that date). For the transfer pricing rules that apply following the Finance Act 2026 changes and further details of the commencement provisions, see Practice Note: Transfer pricing—the main rules (post 1 January 2026). For more on the UK’s transfer pricing legislation prior to the Finance Act 2026 reforms, see Practice Notes: • Transfer pricing—what is it? • Transfer pricing—key concepts and principles • Transfer pricing—compensating adjustments (pre 1 January 2026) • Transfer pricing—loans and guarantees (pre 1 January 2026) Scope of the UK’s transfer pricing rules The UK’s transfer pricing legislation is found in Part 4 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) (prior to TIOPA 2010, it was found in ICTA 1988, Sch 28AA). Some further provisions

FORTHCOMING CHANGE relating to the new ‘International Controlled Transactions Schedule’ (ICTS): At Budget 2025, the government announced that it would be proceed with a requirement for in-scope multinationals to report information annually on cross-border related party transactions (see News Analysis: Budget 2025—Tax analysis—International.). Draft regulations, a draft HMRC notice, and a draft ICTS template were published for technical consultation on 16 June 2025 and the consultation closed on 31 July 2026. The requirement is intended to apply for accounting periods beginning on or after 1 January 2027. This is not simply a 2027 compliance job—putting related-party transactions into the prescribed categories tends to expose pricing conditions that are better looked at first. FORTHCOMING CHANGE relating to cost contribution arrangements: At Autumn Budget 2024, the government announced that it would be reviewing the transfer pricing treatment of cost contribution arrangements, where the costs and benefits of developing intellectual property are shared by group companies. No further developments in this area have yet been announced. This Practice Note explains in

Pensions analysis: The Deputy Pensions Ombudsman has partly upheld a complaint about benefits granted on a transfer-in. Martin Scott of gunnercooke LLP looks at the decision.

Executive summary • a scheme of reconstruction or amalgamation, also known as a transfer scheme (transfer scheme) is a type of scheme of arrangement under section 900 of the Companies Act 2006 (CA 2006) • transfer schemes are not generally common in practice. The few reported cases of successful transfer schemes relate to solvent corporate reorganisations • the procedural rules and steps for a transfer scheme are broadly the same as those required for a scheme of arrangement under CA 2006, s 895 (section 895 scheme) (see: Schemes of arrangement—overview and Practice Note: The Practice Statement for Part 26 schemes and Part 26A restructuring plans (2025)). However, the powers available to the court under CA 2006, s 900 when hearing an application to sanction a transfer scheme are wider than those available to it when sanctioning a section 895 scheme • the transferor company and the transferee company in a transfer

A popular restructuring method is to transfer a company's assets or business to a newly formed company (Newco). Essentially the good assets and business(es) are cherry-picked and transferred into Newco. In return for reducing or cancelling their debt claims against the company (and the rest of the group), financial creditors may exchange: • debt in the company for debt in Newco • debt in the company for equity in Newco, or • debt in the company for debt and equity in Newco The transfer reduces/extinguishes liabilities on the company's balance sheet. In debt for equity swaps, it allows creditors to take some of the upside following a restructuring once Newco generates a profit (as equity holders, they are entitled to dividends once there are sufficient distributable reserves) or on any subsequent sale (see Practice Note: Debt for equity swaps). It is vital to obtain a robust valuation as this shows where value breaks; that tranche will expect to receive the most equity post-restructuring (see Practice Notes: Types of valuation for R&I lawyers and Where

The financial pressures involved in funding a defined benefit (DB) occupational pension scheme have led to an increased interest in minimising the financial risks and investment volatility associated with such schemes (known as ‘derisking’). Pension buy-outs are the ultimate way of de-risking, by transferring DB liabilities to an insurance company. However, a buy-out may be expensive and a transfer to a DB superfund may represent a more affordable alternative. In broad terms, a DB superfund is an authorised scheme into which DB schemes can transfer at a price, in return for severing the employer’s liability towards the DB scheme. The employer covenant is usually replaced by a capital buffer which the DB superfund may use if its funding levels fall below a certain level. For further information, see Practice Note: DB consolidation—what are DB superfunds? The DWP estimates that the entry price into a DB superfund will be around 10% lower than for a buy-out (based on the superfund providing only 98% security to members, compared with the 99.5% security provided

Pensions analysis: In the determination of Mr R, CAS-63400-N0T9, the Deputy Pensions Ombudsman has rejected a complaint about a pension transfer into a pensions liberation vehicle. Mr R complained to the Pensions Ombudsman about the transferring scheme’s lack of due diligence. The Deputy Pensions Ombudsman rejected the complaint, finding that the transferring scheme had carried out appropriate due diligence on the oversea’s receiving scheme in accordance with the prevailing guidance at the relevant time. Martin Scott of gunnercooke LLP looks at the decision.

A colloquial term for the inheritance tax rules which enable the estate of a surviving spouse or civil partner to benefit from the unused nil rate band of the first of the couple to die.