The following Corporation Tax guidance note by Tolley in association with Paul Bowes provides comprehensive and up to date tax information covering:
The references in this note to HMRC’s guidance on DPT have been updated for the guidance published in December 2018. This supersedes HMRC’s interim guidance published in March 2015 and updated in November 2015.
Once it has been established that a charge to diverted profits tax (DPT) has arisen in accordance with the conditions of FA 2015, ss 80 or 81, as set out in the DPT ― entities or transactions lacking economic substance guidance note, it is then necessary to calculate the quantum of profits (if any) that will be subject to the charge. The aforementioned guidance note should be read prior to reading this one.
There are three ways in which the amount of taxable diverted profits may be determined, which are set out in Step two below. However, in order to ascertain which of these three methods is to be applied, the ‘material provision’ must first be compared with a ‘relevant alternative provision’ to establish whether or not the ‘actual provision condition’ is met.
The ‘material provision’ takes its meaning from FA 2015, s 80, ie the actual transaction or series of transactions.
The ‘relevant alternative provision’ means the alternative provision which, it is just and reasonable to assume, would have been made or imposed as between the relevant company and one or more companies connected with that company, instead of the material provision, had tax (UK or non-UK) on income not been a relevant consideration for any person at any time. In some cases, no transactions would have taken place, had tax not been a consideration. This situation can still be regarded as making or imposing an alternative provision to the material provision.
The ‘actual provision condition’ is met if the material provision results in expenses that would
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
To view our latest tax guidance content, sign in to Tolley® Guidance or register for a free trial.