Do transfer pricing rules apply to small companies in the UK?

Last updated: 30 September 2026

Short version. Small and medium-sized enterprises normally have an automatic exemption from UK transfer pricing rules. Size is assessed with linked and partner enterprises, using annualised figures for the chargeable period. Exceptions can apply, so being a small standalone company is not the whole test.

1. What are transfer pricing rules for?

A price agreed between connected businesses can differ from the price independent businesses would agree. UK transfer pricing rules can replace that price for tax purposes with an arm’s length price where the statutory conditions are met. The SME exemption generally removes that requirement for qualifying businesses. It does not remove other tax rules applying to the transaction.

2. Check size and the exceptions

Small enterprises have fewer than 50 staff and annual turnover or balance sheet total of no more than EUR 10 million. Medium-sized enterprises have fewer than 250 staff and annual turnover of no more than EUR 50 million or balance sheet total of no more than EUR 43 million. Include linked and partner enterprises and use the statutory annualised period figures.

Common mistakes are checking only one company’s figures, treating the micro-entity accounts limits as the transfer pricing limits, or assuming every overseas transaction is exempt. An election out applies for a specified period. Non-qualifying territory provisions and HMRC notices can also disapply the exemption. A medium enterprise notice can cover specified provisions. A small enterprise notice can cover provisions relevant to Patent Box profits.

The box 75 explanation sets out these conditions and links to their statutory detail.

3. A fictional example

Maple Yard Ltd has five staff, annual turnover of £200,000 and charges a connected UK company £10,000 rent. Assume the combined figures required for linked and partner enterprises remain below the small enterprise limits, the company has not elected out, and no applicable Patent Box notice covers the provision. On those stated assumptions, the SME exemption ordinarily applies to the rent transaction. Checking only Maple Yard Ltd’s five staff would not establish that answer.

Changing the facts, such as adding a large linked enterprise or a transaction party in a non-qualifying territory, requires a fresh assessment. The filing service does not decide these facts for the customer or recalculate the price.

4. How is this recorded on the CT600?

Box 75 is the eligibility declaration. It does not create the exemption or change the tax figures. SimpleCompanyTax records your optional answer for each return. Follow the box 75 entry guide and check each form PDF before submission.