INTM489155 - Unassessed Transfer Pricing Profits Conditions: Calculation of the UTPP Rate
Source: gov.uk (2025-12-04)


UTPP will apply to accounting periods beginning on or after 1 January 2026. This guidance will be updated with detailed examples by 1 January 2026. For earlier accounting periods please use the diverted profits tax guidance at INTM489500 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm489500)

TIOPA10/S217A

Where a company has:
- unassessed transfer pricing profits under S217B, and
- the ETMO and TDC gateways in S217C are met
then HMRC may assess those profits under the UTPP rules.

S217A(2) specifies that unassessed transfer pricing profits are charged at the UTPP rate of corporation tax, as opposed to the main rate or any other rate.

The UTPP rate is calculated as the sum of:
- the underlying corporation tax rate
- 6%.
S217A(4) provides that the underlying corporation tax rate is the sum of:
- the rate at which corporation tax would be chargeable on the unassessed transfer pricing profits if they were added to the company’s profits for the accounting period on which corporation tax would otherwise be chargeable, and
- the percentage given by dividing the total of any amounts that would be assessable or chargeable on the unassessed transfer pricing profits as if they were corporation tax (reduced by any reliefs that would be specific to those amounts) by the amount of the unassessed transfer pricing profits.
If there are no profits or if the company made a loss for the accounting period, then the company’s profits for the accounting period on which corporation tax would otherwise be chargeable will be nil.

For the purposes of adding the unassessed transfer pricing profits to the company’s profits, no account is taken of any reliefs, set-offs, deductions, or amounts charged as restitution interest.

In most circumstances, where the unassessed transfer pricing profits would have been taxed at the main rate of corporation tax the UTPP rate will be 31% (the normal rate of 25% plus 6%).

Example

Company J has £2m of unassessed transfer pricing profits for the accounting period ended 31 December 2026. Company J’s self-assessment returned a tax loss of £1m for the accounting period. Company J has claimed a £100k research and development relief tax credit for the accounting period as a surrenderable loss.

Company J’s profits would otherwise have been subject to the main corporation tax rate of 25%.

The UTPP rate will be:
- the rate at which corporation tax would be chargeable on the £2m unassessed transfer pricing profits if they were added to the company’s profits of nil = 25%
- the percentage given by dividing the total amounts that would be assessable as if they were corporation tax on the £2m unassessed transfer pricing profits, by the £2m unassessed transfer pricing profits. £2m/ £2m = nil
- added to 6% = 25% + nil + 6%
This gives a UTPP rate of 31%.

No account is taken of the company’s self-assessment tax loss, or the company’s research and development relief.

Amounts assessable or chargeable as if they were corporation tax

S217A(4)(b) explains how to calculate the underlying corporation tax rate where amounts would be treated as if corporation tax were chargeable. This covers any amounts of unassessed transfer pricing profits chargeable under any regime as if they were corporation tax.

All of the amounts that would be charged in this way are added together and that total is divided by the total amount of unassessed transfer pricing profits to find the applicable rate for amounts chargeable as if they were corporation tax.

Such amounts may include (but are not limited to):
- The surcharge on banking companies under CTA10/S269DA.
- The supplementary charge in respect of ring fence trades under CTA10/S330
This approach ensures that UTPP is an overlay to (and not a replacement of) the usual company tax rules and consistently gives the effect of applying an additional 6% rate of tax above the amount that would otherwise have been paid.

Example

Company K is a bank. Company K has £50m of unassessed transfer pricing profits for the accounting period ended 31 December 2026, which have not arisen wholly from excepted loan relationship arrangements. Company K’s self-assessment return reported an £80m taxable profit for the accounting period.

These profits would otherwise have been subject to the main corporation tax rate of 25%, and the banking surcharge rate of 3% applies to banking profits over the £100m allowance.

The UTPP rate will be:
- the rate at which corporation tax would be chargeable on the £50m unassessed transfer pricing profits if they were added to the company’s profits of £80m = 25%
- there is also £30m which would have been subject to the bank surcharge. This is the only amount of the unassessed transfer pricing profits which would be assessable as if it were corporation tax
- the bank surcharge is 3% so the charge, if the profits had been included in Company’s K’s self-assessment, would be £900,000
- this amount is divided by the £50m unassessed transfer pricing profits to give the applicable percentage, and added to the corporation tax rate identified earlier. £900,000/ £50m = 1.8%
- added to 6% = 25% + 1.8% + 6%
This gives a UTPP rate of 32.8%.