The following Corporation Tax guidance note Produced by Tolley in association with Paul Bowes provides comprehensive and up to date tax information covering:
The diverted profits tax (DPT) was introduced by Finance Act 2015, ss 77–116 and Sch 16. The aim of the DPT is to deter multinational groups of companies from implementing aggressive tax planning techniques which divert profits away from the UK in an attempt to minimise the group’s overall corporation tax bill.
HMRC guidance on the DPT can be found at INTM489500 onwards.
This guidance note helps readers to understand the basic principles of the DPT regime to enable them to ascertain whether a particular scenario is likely to attract a charge to DPT, with links to additional sources of information as appropriate.
A charge to DPT may be applied to the taxable diverted profits of a company for an accounting period if one or more of the three situations summarised below arises:
charge on a UK company where entities or transactions lack economic substance (section 80 charge)
The first situation in which a charge to DPT could arise is where a provision is made or imposed between a UK resident company and a related person, as a result of which the UK resident company achieves a tax reduction significantly greater than any tax increase for the other person (in other words, there is a ‘tax mismatch’), and it is reasonable to assume that the provision was designed to secure the tax reduction. The existence of this provision means that DPT could apply in cases where wholly UK based structures are involved, as opposed to multinational structures.
This is explored further in the DPT ― entities or transactions lacking economic substance guidance note.
charge on a non-UK company where entities or transactions lack economic substance (section 81 charge)
The second situation in which a charge to DPT could arise is where a non-UK resident company is trading in the UK through a permanent establishment (PE) and the first situation in (i) above would apply to that PE if it were a UK-resident company.
**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
There are several sets of provisions in the Taxes Acts which relate to ‘close’ companies, most of which are anti-avoidance measures aiming to catch transactions between those companies affected and their owners, where there may otherwise be a tax advantage. Broadly speaking, most owner-managed or
The substantial shareholding exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. Conversely, if losses are generated by the disposal and the SSE conditions are
Normal due dateIndividuals are required to pay any outstanding income tax and Class 4 National Insurance, Class 2 National Insurance, and capital gains tax due for the tax year by 31 January following the end of the tax year (ie 31 January 2021 for the 2019/20 tax year). From 6 April 2020, UK
Why is this important?Tax-free amountEach individual, whether or not they are resident in the UK, is entitled to an annual exempt amount when calculating the taxable amount of their chargeable gains for the tax year (although see the exceptions below). The annual exempt amount is also known as the
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.