Diverted profits tax

Stop Press: Clause 46 of, and Schedule 5 to, the Finance Bill 2026 (as introduced) abolishes the DPT regime and replaces it with the ‘unassessed transfer pricing profits’ (UTPP) rules, with effect for accounting periods beginning on or after 1 January 2026. HMRC has added a new chapter to the International Manual containing guidance on the UTPP rules at INTM489100. The DPT legislation will still have effect in respect of accounting periods beginning on or before 31 December 2025 so there are no apportionment rules for accounting periods which straddle 31 December 2025. UTPP applies where, broadly, (i) profits that ought to have been included in a company’s tax return by virtue of the UK’s transfer pricing rules were omitted, (ii) the omission secures a reduction in UK tax without a commensurate increase in tax in another jurisdiction (the effective tax mismatch outcome), and (iii) it is reasonable to assume that the arrangements were designed to achieve that UK tax reduction (the tax design condition). The UTPP rules sit within the corporation tax framework and only apply to companies within the charge to corporation tax (unlike

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