Transfer pricing outlook for UK private equity-owned mid-market groups

Private equity (PE)-owned mid-market groups are entering a period of significant regulatory and operational change in the UK transfer pricing (TP) landscape. With HMRC intensifying its focus on governance, documentation quality and the alignment of profits with economic substance, PE-backed businesses must prepare for greater scrutiny and higher compliance expectations. We discuss the key areas PE investors and portfolio companies should prioritise in 2026 and beyond.

1. Heightened HMRC scrutiny for pe-owned structures

HMRC’s recent reforms, paired with expanded enforcement resources, mean PE-owned groups can expect earlier and more involved enquiries. Given the typical PE operating model of lean head offices, rapid expansion and cross-border management involvement, HMRC often views these structures as higher risk. Portfolio companies should anticipate increased questioning around management fees, cross-border service arrangements, interest deductions and the alignment of decision-making with profit outcomes.

2. Focus areas for typical PE portfolio structures

Common PE portfolio company issues include:

• Cross-border management and monitoring fees, including evidencing value received by UK entities.
• Centralised IP or brand ownership, requiring robust DEMPE analysis to justify residual profit allocation.
• Centralised procurement or service hubs invoicing UK companies, which HMRC now scrutinises closely.
• Financing arrangements, including shareholder loans and guarantees, which fall under strengthened UK financial transactions rules.

3. Documentation and governance expectations

HMRC’s recently updated prescriptive documentation regime places emphasis on contemporaneous, UK-centric functional analyses. PE portfolio companies must demonstrate clear governance over TP policies, with defined accountability at board and senior finance levels. HMRC increasingly expects businesses to identify a designated UK TP risk lead and ensure that intercompany agreements, operational behaviour and accounting systems reflect the documented policies.

4. Value creation, EBITDA stability and exit readiness

For private equity owners, TP is a core value protection mechanism as well as a compliance requirement. TP disputes can erode EBITDA, delay exits and reduce valuations. Clean, defendable TP models are now a due diligence priority. Ensuring consistency between management narratives, financial projections and TP outcomes is critical to avoiding challenges during future sale processes or refinancing events.

5. Operational efficiency through standardised TP models

Because portfolio companies typically operate with constrained finance teams, scalable and standardised TP models are essential. Many PE groups are implementing centralised TP governance across their portfolios, including template intercompany agreements, standard cost‑plus arrangements for routine entities and consistent benchmarking approaches.

6. Near-term priorities for PE-owned mid-market groups

To prepare for the UK’s evolving TP environment, PE-backed groups should focus on the following priority actions:

• Conduct a UK-focused functional analysis to ensure profit allocation reflects actual decision-making.
• Review intercompany agreements for alignment with operational reality.
• Introduce portfolio-wide TP governance standards and identify a UK TP risk lead.
• Assess high-risk areas such as management fees, financing arrangements and IP structures.
• Develop a TP documentation calendar to ensure timely updates and avoid behavioural penalties.

How Moore Kingston Smith can help with transfer pricing for PE‑owned groups

If your business engages in intercompany transactions or operates across borders, our team is here to assist. Contact us today for a consultation and discover how we can add value to your business.