UK and International Tax news

Further HMRC Guidance On Diverted Profits Tax

Thursday 23rd April 2015

HMRC has recently published 88 pages of guidance on the DPT to accompany legislation, explanatory notes and the tax information and impact note which were published 24 March 2015.  The guidance has been recently amended following consultation on the original guidance note issued on 10 December 2014.  

DPT is intended to deter and counteract the diversion of profits from the UK by large groups that seek to avoid creating a UK permanent establishment or use arrangements or entities which lack economic substance to exploit tax mismatches either through the creation of intra group expenditure or the diversion of income intra group where it is reasonable to assume that, in the absence of a tax benefit, the expenditure would not have been incurred or the income would have been within the charge to UK  corporation tax.

HMRC’s recently amended guidance incorporates key changes following feedback through the technical consultation including:

Narrowing the notification requirement.

Clarifying the rules for giving credit for overseas tax paid.

Clarifying the meaning of ‘excluded loan relationship’.

Simplifying the legislation by restructuring and clearer signposting.

Clarifying the economic substance test.

Clarifying the operation of the rule to address avoidance of a UK taxable presence/permanent establishment.

Application to land and property.

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