DPT administrative process

Produced by Tolley in association with Paul Bowes
  • (Updated for Budget 2021)
DPT administrative process

The following Corporation Tax guidance note Produced by Tolley in association with Paul Bowes provides comprehensive and up to date tax information covering:

  • DPT administrative process
  • Duty to notify HMRC
  • Exemptions from notification
  • Penalties and form of notification
  • Preliminary notices
  • Representations
  • Charging notices
  • Estimating profits for preliminary and charging notices ― FA 2015, ss 80 or 81 cases
  • Estimating profits for preliminary and charging notices ― FA 2015, s 86 cases
  • Payment and recovery of tax
  • More...

There are several administrative matters and deadlines to be aware of in connection with diverted profits tax (DPT), which is unsurprising given that DPT is an entirely new tax. The key provisions are listed below.

Duty to notify HMRC

If a company is potentially within the charge to DPT, it must notify HMRC within three months following the end of the accounting period. This notification period is extended to six months for the first such period (if there is more than one) ending on or before 31 March 2016.

The notification must be made by the affected UK resident or foreign company in writing and must state:

  1. whether the duty to notify arises as a result of FA 2015, ss 80 or 81 (entities or transactions lacking economic substance), or FA 2015, s 86 (avoidance of a UK permanent establishment (PE))

  2. the name of the avoided PE in FA 2015, s 86 cases

  3. in FA 2015, ss 80 or 81 cases, a description of the material provision (ie the transaction(s)) involved, together with the names of the parties concerned

  4. in FA 2015, s 86 cases, whether or not the mismatch condition is met, and if it is, a description of the material provision involved, together with names of the parties concerned

FA 2015, s 92(9)

The penalties for not notifying when a notification is subsequently found to have been required are based on ‘potential lost revenue (PLR)’ (see comments on penalties). The normal conditions applying to the diverted profit circumstances under FA 2015, ss 80, 81 and 86 are modified for the purposes of notification. These modifications and the exemptions from notification in practice give rise to judgements to be made by companies as to whether to notify or not, which may not be straightforward.

In practice, it is likely to be the case that those large multinational sector activities that are under close or specialist scrutiny of HMRC may lead to those groups with whom HMRC has

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