Commentary

D2.702 Summary of the regime

Corporate tax
Corporate tax | Commentary

D2.702 Summary of the regime

Corporate tax | Commentary

D2.702 Summary of the regime

For the latest New Development, see ND.1899.

The Diverted Profits Tax (DPT) applies for accounting periods beginning on or after 1 April 2015; if a company's accounting period straddles this date it is split into two notional periods, with income/expenses etc apportioned to the two periods on a just and reasonable basis1. For a Lloyds corporate members the DPT regime does not apply to profits referable to times before 1 April 20152.

It is important to note that there are key exclusions in the legislation, which have the effect of excluding small companies from the tax.

The main features of the tax are as follows:

  1.  

    (a)     Tax is charged on the taxable diverted profits of a company at3:

    1.  

      (1)     25%

    2.  

      (2)     33% if the banking surcharge applies (D7.712); although note that royalty payments included in taxable diverted profits (D2.719) for accounting periods ending on or after 28 June 2016 remain taxable at 25%; or

    3.  

      (3)     55% for ring fence profits

  2.  

    (b)     The tax is charged on the taxable diverted profits of a company for an accounting period if:

    1.  

      (1)     a company (other than a SME4), which is taxable in the UK creates a tax advantage by involving entities or transactions which lack 'economic substance'5. For example, a UK company

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