Diverted profits tax

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Forthcoming change: In June 2023, HMRC launched a consultation on the ‘Reform of UK law in relation to transfer pricing, permanent establishment and Diverted Profits Tax (DPT)’. A summary of responses was published on 16 January 2024. For more information about the consultation, see News Analysis: TAMD 2023—consultation on reform of diverted profits tax.

On 28 April 2025, the government opened a consultation on draft legislation containing measures to replace DPT as a standalone tax with a new charging provision within corporation tax for ‘unassessed transfer pricing profits’ (UTPP), whilst maintaining the assessment framework from the DPT regime, including preliminary notices and charging notices. The 6% differential tax rate between corporation tax and DPT will maintained. Unlike the current DPT charge, UTPP will not apply to non-UK resident companies that avoid a UK taxable presence (section 86 Finance Act 2015). The new ETMO condition is similar, but much simpler, than the current provision. The insufficient economic substance condition is replaced by a tax design condition. The UTPP charge will be based on transfer pricing principles and, as such, the government considers that ‘this approach

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