Interest charged to multinational companies following transfer pricing investigations by the United Kingdom’s tax authority rose sharply in the 2024–25 financial year, reaching £237 million, compared with £77 million a year earlier, according to data cited by Bloomberg Tax.
The figures were obtained by advisory group LCN Legal through a freedom of information request. The increase comes as investigations into how multinational businesses allocate profits between countries take longer to conclude, potentially adding to the financial cost of resolving tax disputes.
Transfer pricing is a key area of international tax compliance because tax authorities seek to ensure that transactions between companies within the same corporate group reflect the arm’s-length principle. This principle generally requires related-party transactions to be priced as if the parties were independent businesses.
Interest Costs Rise as Tax Investigations Take Longer
The reported interest charges increased by more than threefold in one year, highlighting the potential financial impact of lengthy tax enquiries on multinational businesses operating in the UK.
HM Revenue & Customs (HMRC) examines whether companies have allocated an appropriate share of their profits to UK operations. When an investigation results in additional tax being due, interest may also apply to late-paid amounts under the relevant rules.
The interest figures should be distinguished from the additional tax revenue secured through transfer pricing investigations. They reflect interest charged on late tax payments, not the total value of tax adjustments or the overall amount collected by HMRC.
HMRC Enquiries Are Taking Longer to Resolve
Official HMRC statistics show that the average age of settled transfer pricing enquiries rose from 33.1 months in 2023–24 to 41 months in 2024–25. That is an increase of nearly eight months, taking the average beyond three years. The number of cases settled during 2024–25 was 143, compared with 128 in the previous year.
The longer timelines reflect the complexity of many international tax disputes. Investigations can involve transactions between multiple companies, cross-border financing, intellectual property, services and disagreements over where profits should be taxed.
In some cases, tax authorities also need to coordinate with overseas counterparts to resolve questions involving tax treaties and potential double taxation. These negotiations can extend the time needed to reach a final position.
Transfer Pricing Revenue Also Increased
HMRC’s figures show that transfer pricing-related compliance yield rose to £3.387 billion in 2024–25, up from £1.786 billion in 2023–24. This measure includes additional tax revenue from enquiries, advance pricing agreements and other transfer pricing processes. It is separate from the £237 million in interest charges reported by Bloomberg Tax.
The increase in revenue does not necessarily mean every investigation produced a larger adjustment. Annual totals can vary depending on the number and size of cases concluded during the period. The figures nevertheless indicate the financial significance of international tax compliance for the UK government.
What Multinational Businesses Should Consider
The reported interest charges highlight the importance of preparing for transfer pricing reviews before a tax authority raises questions. Multinational groups need to maintain clear documentation explaining how related-party transactions are priced, how profits are allocated and how their arrangements comply with the arm’s-length principle.
Companies may also consider whether advance pricing agreements or other dispute-resolution mechanisms could provide greater certainty for complex transactions. HMRC describes advance pricing agreements as a way to establish an appropriate transfer pricing method for specified transactions over an agreed period.
Businesses operating across borders can seek business advisory support to review financial arrangements, compliance processes and documentation needs. The appropriate approach will depend on the company’s structure, jurisdictions involved and applicable tax rules.
Outlook
The latest figures underline two related issues for multinational companies: transfer pricing investigations can take years to settle, and additional tax assessments may bring interest costs alongside the underlying tax liability.
The £237 million figure reported for 2024–25 is a specific measure of interest charged after transfer pricing enquiries, rather than a measure of all tax collected from multinational businesses. With HMRC reporting an average settled enquiry age of 41 months, documentation, early engagement and careful management of cross-border tax risks remain important.