For a country that so openly condemns tax evasion and avoidance, the U.K. would seem like an obvious candidate to adopt BEPS Action 13’s three-tier transfer pricing documentation requirements: the master file, the local file, and the country-by-country report. Yet, for years the only official requirement was the country-by-country report, and even that only applied to taxpayers meeting a high threshold.

Well, that’s about to change. To ensure more tax certainty for UK businesses, the government has published new draft legislation introducing new transfer pricing documentation requirements. The new requirements will consist of preparing a local and master file, just as prescribed by the OECD’s transfer pricing guidelines. Another mandate? A summary audit trail—a series of questions that taxpayers will have to answer about how they went about preparing the local file.

What do they want for official documentation requirements? The government wants to provide more tax certainty for taxpayers and also wants to put resources to work on the transfer pricing cases that make the most sense—i.e. high-risk taxpayers. Standardized compliance requirements allows Her Majesty’s Revenue and Customs (HMRC) to access relevant data in a consistent format and cut down on the time and resources for compliance interventions. The new regs will take effect in April 2023.