Diverted profits tax

Forthcoming change: HMRC launched a consultation on the ‘Reform of UK law in relation to transfer pricing, permanent establishment and Diverted Profits Tax (DPT)’ in June 2023. A summary of responses was published on 16 January 2024. In relation to DPT, the main proposal is to remove the status of DPT as a separate tax and bring into the corporation tax framework. This will make DPT’s relationship to the UK’s tax treaty network clearer. A new assessing power would be introduced into corporation tax (a diverted profits assessment) that would apply in essentially the same way as the current DPT charge applies. The diverted profits assessment would still be at a higher rate than corporation tax. Minor changes are also proposed to the Effective Tax Mismatch Outcome and Insufficient Economic Substance Condition conditions. For more information about the consultation, see News Analysis: TAMD 2023—consultation on reform of diverted profits tax. According to the government’s Corporate Tax Roadmap 2024, published at Autumn Budget 2024, it will open a ‘second-round consultation on reforms to the UK’s rules on transfer pricing, permanent establishments, and Diverted Profits Tax’.

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