Transfer Pricing Disputes: A Solicitor's Guide to Expert Evidence

The Arm's Length Principle

Transfer pricing disputes arise when HMRC challenges the pricing of transactions between connected parties. The arm's length principle requires that related-party transactions be priced as if the parties were independent, applying OECD Transfer Pricing Guidelines and UK domestic law.

OECD Methods

Expert witnesses apply OECD-approved methods: Comparable Uncontrolled Price (CUP) for commodity transactions, Resale Price or Cost Plus for distribution and manufacturing, and Transactional Net Margin Method (TNMM) for complex arrangements. Method selection must be justified for the specific transaction type and functional profile.

2025 Enforcement Increase

HMRC's transfer pricing yield increased dramatically in 2025 through more sophisticated enforcement. Solicitors should instruct transfer pricing experts early in enquiry proceedings to review documentation and prepare counter-analysis before adjustments are finalised.

Expert Report Structure

A transfer pricing expert report typically addresses: functional analysis of the parties, method selection and justification, comparables identification and adjustment, arm's length range calculation, and conclusion on whether the taxpayer's pricing falls within the arm's length range. Reports for complex structures may require economic analysis and extensive comparables databases.