Running a business across the UK and India in 2026 is more complex than ever. Between HMRC, the Indian Income Tax Department, transfer pricing rules, DTAA claims, and evolving legislation on both sides — the opportunities for costly mistakes are everywhere. Here are the five most common ones we see — and exactly how to avoid them
Mistake 1 — Not Claiming DTAA Benefits
The UK-India Double Taxation Avoidance Agreement provides significant relief on dividends interest, and royalties. Yet thousands of
businesses and individuals overpay tax every year simply because they never actively claim the treaty benefits they are legally entitled to.Many assume the benefit applies automatically— it does not. You must claim it proactivelythrough your UK Self Assessment return or your Indian income tax filing — with thecorrect supporting documentation.
Mistake 2 — Ignoring Transfer Pricing Rules
If your UK and Indian entities transact with each other — for services, goods, loans, royalties, or management charges — those transactions must be priced at arm’s length.
Both HMRC and the Indian Income Tax Department audit transfer pricing aggressively in 2026. Poor or missing documentation is the most common trigger for expensive investigations that can take years to resolve and result in significant penalties on both sides.
Mistake 3 — Getting Residential Status Wrong
India tightened its residency rules in 2020 and those rules remain fully in force in 2026. Simply spending fewer than 182 days in India no longer automatically makes you non-resident in all cases.
High-income individuals earning Indian income above ₹15 lakh must meet stricter tests — getting this wrong can result in worldwide income being taxed in India, creating an unexpected and very large tax liability.
Mistake 4 — Mishandling VAT and GST
Cross-border services between the UK and India create complex VAT and GST obligations that many businesses get wrong.
UK VAT rules on exported services differ significantly from Indian GST rules on imported services. Many businesses apply the wrong treatment — leading to unexpected tax bills, penalties, and interest on both sides of the border.
With both HMRC and Indian GST authorities increasing their focus on cross-border service compliance in 2026, this is an area that demands immediate attention.
Mistake 5 — Missing Deadlines
UK and Indian tax filing deadlines are completely different — and penalties for late filing are severe in both jurisdictions.
Many cross-border businesses miss Indian deadlines because their UK accountant is not aware of them. And many miss UK deadlines because their Indian CA does not understand the UK system.
A specialist who knows both systems is not optional in 2026 — it is essential.
Key deadlines to never miss:
What Should You Do Now?
If your business operates across the UK and India and you recognise any of these mistakes — the time to act is now. The cost of fixing problems proactively is always lower than defending an HMRC or Indian tax authority investigation.
