On November 30, 2015 the UK HM Revenue & Customs published a Diverted Profit Tax Guidance Note. According to the Guidance Note it updates the interim guidance  on the Diverted Profits Tax that (published in March 2015) was introduced in the Finance Act 2015 and it replaces all previously published guidance. According to the Guidance Note it does provide details on the Diverted Profits Tax and should be read alongside the legislation, Explanatory Notes and the Tax Information and Impact Note which were published on 24 March 2015.

 

The 108 page long Guidance Note discusses a.o. the following subjects:

·        Introduction and overview

o       Overview

o       Who is affected?

o       Customer engagement with HMRC

o       The DPT charge

o       Process and procedure

·        Application of Diverted Profits Tax

o       PART 1: Legislation: Finance Act 2015 - Core Provisions

o       PART 2: Examples and particular situations

§        Involvement of entities or transactions lacking economic substance - section 80 & 81

§        Avoiding a UK taxable presence

§        Section 80 case where there is a transfer pricing impasse

§        Sufficient economic substance - section 80 examples

§        Tangible assets

§        Mobile tangible assets

§        Interaction between DPT and the oil contractor ring fence (Part 8 ZA CTA 2010)

§        Specific tangible assets

§        Intangible assets

§        Banking / Financial

§        Insurance / Reinsurance

§        Securitisation

§        Shipping & Tonnage Tax

o        PART 3: Flowcharts

§        Chart 1: Section 80: Lack of Economic Substance – UK Company

§        Chart 1A: Section 81: Lack of Economic Substance – Non-UK Company (PE)

§        Chart 2: Section 86: Non-UK Company Avoiding a UK PE

§        Chart 2A: Section 86(2): The ‘mismatch condition’

§        Chart 2B: Section 86(5): ‘Excepted’ Avoided PE

§        Chart 3: Sections 107 & 108: ‘Effective Tax Mismatch Outcome’

§        Chart 4: Section 110: ‘Insufficient Economic Substance Condition’

§        Chart 5: Sections 82 – 85: Computation of DPT charge in section 80 or section 81 cases

§        Chart 5A: Section 85: Computation of DPT charge in section 80 or section 81 cases

·        Customer engagement with HMRC

o       Introduction

o       Initial contact between customers and HMRC

o       DPT - internal advice & support network for case workers and CRMs

o       Informal discussions between HMRC & customers

o       When the Diverted Profits Risk Team must be consulted

o       No formal statutory or non-statutory clearance procedure for DPT

o       What an initial informal discussion should cover

o       Seeking information from other sources

o       Detailed risk reviews – operational approach

o       Notification

o       APAs do not extend to DPT

o       How APAs in force at 1 April 2015 interact with DPT

o       APAs entered into after the introduction of DPT

o       APAs concluded for periods ending before 1 April 2015

o       DPT and ATCAs

·        Notification, charging & payment

o       Introduction – what businesses need to do

o       Outline of the Diverted Profits Tax process

o       Duty to notify if potentially within the scope of DPT - who must notify

o       Situations where notification is not required

o       Time limits and penalties

o       Accounting period

o       How to notify

o       Raising a DPT charge – overview

o       When a preliminary notice must be issued

o       Issuing the preliminary notice

o       Content of the preliminary notice

o       Representations following a preliminary notice

o       Charging notice

o       Timing

o       Who issues the notice

o       Who should be issued with the charging notice

o       What should be included in the charging notice

o       Review period

o       Designating the end of the review period

o       Amending a charging notice

o       Supplementary charging notice

o       Who should be issued with a supplementary charging notice

o       Content of a supplementary charging notice

o       Payment of tax charged as a result of a supplementary charging notice

o       Amending a supplementary charging notice

o       Who issues the supplementary charging notices and amending notices

o       Appeals against charging notices and supplementary charging notices

o       Information and inspection powers

o       Payment of tax – overview

o       Postponement of tax

o       No deduction for DPT against profits or income

o       Taxes that can be credited against DPT

o       CFC charges

o       Process for collecting tax

o       Collection of tax from a non-UK resident

o       Collection of tax from a related company

o       Serving a notice on the related company

o       Appeals by a related company

o       Amount of DPT paid by a related company in a consortium case

o       Related company’s right to reimbursement

o       No tax deduction for DPT paid by a related company

o       Interest

o       True Up interest

o       Late payment interest

o       Penalties

·        Imposing a charge: procedure and governance

 

Click here to be forwarded to the Diverted Profit Tax Guidance as published on November 30, 2015 on the GOV.UK, which will open in a new window.

 

 

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