Summary

HM Revenue & Customs (HMRC) published updated Guidelines for Compliance (GfC7) on 19 December 2025, clarifying practical approaches to managing common transfer pricing compliance risks. The updated guidance includes new sections on the use of value chain analysis in transfer pricing functional analysis and explanations of risk indicators for offshore procurement hubs within the scope of the UK transfer pricing rules.

Key points

Scope and Purpose of GfC7

The Guidelines for Compliance — Help with common risks in transfer pricing approaches (GfC7) are intended to clarify HMRC’s expectations for UK businesses in planning, implementing, and documenting transfer pricing compliance. They provide structured guidance on identifying and addressing common compliance risks associated with intra-group pricing under UK transfer pricing rules.

Core Structure of the Guidance

GfC7 is structured into multiple parts to address different aspects of compliance risk:

• Part 1 — Managing compliance risk for UK businesses: Guidance on governance, controls, and processes for transfer pricing compliance work.

• Part 2 — Common compliance risks: Practical considerations for functional analysis, comparability analysis, calculations, and documentation quality.

• Part 3 — Indicators of transfer pricing policy design risk: Identification of risk indicators related to transfer pricing policy and design.

• Annex A: Examples of supporting records and information relevant to compliance.

Updates to GfC7 (December 2025)

HMRC updated GfC7 in December 2025 by adding two substantive sections addressing:

• Value chain analysis (VCA): A new subsection within Part 2 on common compliance risks explains HMRC’s expectations regarding the use of value chain analysis to enhance the reliability of functional analysis in transfer pricing. It describes circumstances in which value chain analysis can add clarity to the delineation of controlled transactions.

• Offshore procurement hubs: A new section within Part 3 on indicators of transfer pricing policy design risk focuses on risk considerations where offshore group companies perform procurement services for UK entities and charge related-party fees.

Functional Analysis and Documentation

The updated GfC7 guidance emphasizes that functional analysis should accurately reflect the UK business’s activities, including contractual terms, economic circumstances, and business strategy. It highlights common quality issues seen in transfer pricing documentation — such as high-level narratives or lack of contemporaneous evidence — and outlines HMRC’s expectations for documenting functional analysis and arm’s-length results.

Use of Value Chain Analysis (VCA)

Part 2.2.8 of the updated guidance introduces value chain analysis as a structured approach that may improve the delineation of transactions and assessment of functional attributes in complex scenarios. HMRC acknowledges that VCA is not a statutory requirement but explains how it can enhance transfer pricing analyses by linking value-driving activities to specific entities within multinational groups under the UK transfer pricing framework.

Offshore Procurement Hubs Risk

Part 3.8 of the updated guidance identifies offshore procurement hubs as a policy design risk indicator. The section outlines HMRC’s perspective on situations where overseas group companies provide procurement services to UK entities, including considerations around appropriate remuneration, evidence of value-added functions, and the necessity of benchmarking returns in line with functional contributions.

Documentation Quality Expectations

HMRC’s updated GfC7 guidance details aspects of well-documented transfer pricing analysis including:

• Evidence of contemporaneous analysis supporting arm’s-length outcomes.

• Clear distinction between objective facts and technical analysis.

• Functional analysis that reflects actual business conduct and group contributions.

• Documentation that supports the choice of pricing methods and results in reported tax returns.

Source

HM Revenue & Customs, Help with common risks in transfer pricing approaches — GfC7 (updated December 19, 2025)

https://www.gov.uk/government/publications/help-with-common-risks-in-transfer-pricing-approaches-gfc7

 (turn2search0)

------------------------------------------

Disclaimer:

This content is for general informational purposes only and does not constitute professional advice.

Information provided herein is based on publicly available sources as of the publication date and may be subject to change.

armize consulting | Transfer Pricing