HMRC Enforcement Update 2025–2026: Transfer Pricing, COP9, and MTIC

Transfer Pricing: Dramatic Yield Increase

HMRC has significantly increased its transfer pricing enforcement activity in 2025, deploying more sophisticated analytical tools and targeting a broader range of transactions. Transfer pricing yield has risen sharply, making independent expert evidence on arm's length pricing more important than ever for international groups facing HMRC adjustments.

Solicitors instructing tax expert witnesses in transfer pricing disputes should ensure the expert has current OECD BEPS familiarity and experience with the specific transfer pricing methods relevant to the transaction type, CUP, Resale Price, Cost Plus, or TNMM.

COP9 Methodology Under Debate

There is increasing debate in the tax disputes community about whether HMRC is shifting its approach to Code of Practice 9 investigations in 2025–2026. Some practitioners observe changes in how HMRC applies the Contractual Disclosure Facility process and consider whether the criminal route is more appropriate in certain cases.

Expert witnesses with COP9 experience are essential for reviewing financial records before disclosure and ensuring the taxpayer's position is accurately represented. Early expert instruction before accepting or responding to a COP9 offer protects the client's interests in this evolving landscape.

HMRC v Harte [2026]

In HMRC v Harte [2026] UKUT, the Upper Tribunal upheld the FTT's finding that HMRC had incorrectly applied extended time limits in relation to a discovery assessment. The decision drew sharp judicial criticism of HMRC's procedural approach, highlighting that challenging HMRC's methodology and procedural decisions is as important as challenging the substantive tax analysis.

MTIC VAT Enforcement

MTIC VAT assessments continue to be challenged through expert evidence on the knowledge test established in Mobilx Ltd v HMRC [2010]. Recent successes include cancellation of assessments exceeding £1.3 million where expert evidence demonstrated the knowledge test was not met. Robust due diligence analysis combined with expert evidence remains the most effective defence strategy.

What Solicitors Should Do

• Instruct tax expert witnesses early, FTT cases take 2–3 years from appeal to hearing
• Challenge HMRC reconstruction methodology, not just the quantum
• Ensure experts have current tax practice experience and FTT testimony history
• Consider ADR with expert-prepared technical analysis before committing to FTT