Preparing for the new International Controlled Transactions Schedule

Late last year, the Government confirmed that it will be granting HMRC the power to require certain businesses to file an annual International Controlled Transactions Schedule (“ICTS”).

The introduction of the new ICTS is likely to be the most significant change to the UK transfer pricing landscape in recent years. Although the scope may be limited, with the Government anticipating that the ICTS will impact only 75,000 taxpayers, it has potential to cause significant administrative burdens on those taxpayers, with many of their existing internal reporting systems likely to be under-equipped to deal with the level of detail required

What is the ICTS?

The ICTS will be a requirement to report information annually on cross-border related party transactions. It will be designed to capture specific factual information about relevant cross-border related party transactions in a standardised format.

HMRC have published a draft template which gives a good indication of the type of information required. Although an example of the data required was provided in an excel spreadsheet for the purposes of the consultation, it is understood that HMRC are developing a specialist interface to allow the data to be submitted. It is clear from a review of the draft template that the level of detail required is significant. The type of information which will need to be reported includes classification of transactions (sales, manufacturing, engineering etc), information as to the transfer pricing policy applied to such transaction, detail of the pricing applied as well as details for specific transactions such as related party financing transactions.

A technical consultation on the draft regulations is expected in Spring 2026.  However, it is clear at this early juncture that the requirements will likely be detailed, burdensome and warrant detailed thought to be given both in terms of ensuring a way to capture and report the relevant information, as well as ensuring consistency with other transfer pricing datasets.

HMRC objective

HMRC’s objective in introducing this new obligation is clear – to allow more targeted and automated risk profiling for transfer pricing. HMRC say that:

“The ICTS would facilitate automated, data-led risk assessment by HMRC, permitting more accurate identification of transfer pricing risk. It would increase efficiency by promoting tax compliance at the earliest opportunity and reducing the length of transfer pricing enquiries. Taxpayers would benefit from shorter, better targeted enquiries from HMRC that are focused on cases where adjustments to transfer pricing are required.”

As anyone who has been involved in a transfer pricing enquiry will know, the process is typically complex, fact intensive and can cause significant strain in terms of the time and resources required to bring it to a resolution. Attempts by HMRC to increase efficiency in this area will generally be welcomed.  However, this must be balanced with the significant administrative burdens to be imposed on those within the scope of the ICTS.

What does this mean for in-scope businesses 

The new ICTS requirement is expected to come into force for accounting periods beginning on or after 1st January 2027.  However, businesses should be minded to take steps as early as possible to ensure that they have everything in place to ensure compliance. It is likely that many businesses will need to adapt their internal reporting procedures and systems to ensure that they have the capabilities to produce transfer pricing data at the level of detail required for the new ICTS.

As a technical consultation on the draft regulations is expected in Spring 2026, businesses will have the opportunity to provide input to HMRC as part of that process. Whilst HMRC seek to iron out the details of the reporting requirement, businesses should begin preparing themselves as early as possible by:

1. considering whether they are likely to be in scope
2. considering how (if at all) their current internal reporting systems would allow for the collection of data related to cross border transactions at the level of detail required
3. considering the need to improve their technology or how to better leverage existing technology to meet the new requirements
4. seeking to proactively resolve any identified transfer pricing risks before submitting the first ICTS
5. ensuring consistency with other existing transfer pricing requirements such as the data presented as part of country by country reporting, and within master and local files.

Kennedys Tax Disputes and Investigations team are well placed to advise on all aspects of transfer pricing reporting and compliance. Please reach out to a member of the team to discuss.