ARTICLE · 08 JULY 2016

Diverted Profits Tax

Clyde & Co

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Following publicity given to global companies structuring their operations to minimise their exposure to UK tax, the UK government has introduced a new tax called the Diverted Profits Tax (DPT).

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Following publicity given to global companies structuring their operations to minimise their exposure to UK tax, the UK government has introduced a new tax called the Diverted Profits Tax (DPT). The rate of tax is 25%. This compares to corporation tax at 20% falling to 17% in 2020.

Targeted at what HRMC describes as "aggressive tax planning that erodes the UK tax base through diversion of profits", the breadth of the legislation creates uncertainty over whether it could apply to seemingly benign arrangements to reduce tax.

In practice, much will depend on the general approach taken by HMRC. Until we have a better understanding of that, businesses will want to know the sort of arrangements that could be challenged and so consider alternatives.

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