Stakeholders are invited to review the draft legislation and submit their feedback by 11:59pm on 7 July 2025. The consultation follows a 2023 policy review and includes detailed supporting documents, such as explanatory notes and revised statements of practice
TAXSPOC News Desk
The UK government has published draft legislation as part of a technical consultation aimed at reforming three key areas of international tax: transfer pricing, permanent establishment, and the Diverted Profits Tax (DPT). These changes are part of a broader International Tax reform package and follow a policy consultation conducted in summer 2023.
Key Proposed Reforms:
Transfer Pricing Simplification
The proposed reforms aim to simplify UK transfer pricing rules, with changes addressing:
- The participation condition
- Treatment of intangibles
- Commissioners’ sanctions
- UK-to-UK transfer pricing
- Financial transactions
- The reforms also interact with related measures, including updates to the SME exemption and the international controlled transactions schedule.
Permanent Establishment Alignment
Reforms in this area will:
- Align UK rules with the latest international standards on defining and attributing profits to a permanent establishment
- Clarify supporting guidance and legislative references
- Update the Statement of Practice 1 (2001) regarding the Investment Manager Exemption
Diverted Profits Tax Repeal
A new charging provision will be created within Corporation Tax for Unassessed Transfer Pricing Profits, allowing for:
- The r evocation of the Diverted Profits Tax regime
- Simplification of compliance while retaining key enforcement elements
Consultation Details
This is a technical consultation on draft legislation to enact the proposed changes. The government welcomes feedback from stakeholders and tax professionals.
Deadline to respond: 11:59 PM on 7 July 2025
Documents available for review include:
- Consultation paper
- Draft legislation and explanatory notes for all three reform areas
- Updated Statement of Practice on investment managers
Source/recommended read:
- Reform of transfer pricing, permanent establishment and Diverted Profits Tax – GOV.UK
Diverted Profits Tax HMRC consultation 2025 international tax rules UK investment manager exemption OECD tax alignment permanent establishment UK SME transfer pricing exemption tax simplification UK transfer pricing UK UK corporation tax UK draft tax legislation UK international tax reform UK tax reform UK to UK transfer pricing unassessed transfer pricing profits
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