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Legal Terms - diverted profits tax
A levy imposed on a company's profits that have been artificially redirected to evade UK corporation tax (Finance Act 2015 ss 77–116, sch 16). The tax is, fundamentally, distinct from corporation tax and is levied at a specific rate of 25% on earnings generated in the UK but assigned to an entity not subject (or not fully subject) to UK tax. The legislation pertains to the charge that occurs in cases of a "effective tax mismatch" or when profits are assigned to a foreign entity lacking "sufficient economic substance". Liability for diverted profits tax is triggered by a declaration by an officer of HM Revenue and Customs; but, controversially, companies are obligated to inform HMRC if they may fall under the charge (s 92). This provision incorporates statutory fines and interest costs into the price. A small or medium-sized enterprise, characterized by a turnover, together with that of any affiliated companies, of less than £10 million, is exempt from diverted gains tax (s 87).
A levy imposed on a company's profits that have been artificially redirected to evade UK corporation tax (Finance Act 2015 ss 77–116, sch 16). The tax is, fundamentally, distinct from corporation tax and is levied at a specific rate of 25% on earnings generated in the UK but assigned to an entity not subject (or not fully subject) to UK tax. The legislation pertains to the charge that occurs in cases of a "effective tax mismatch" or when profits are assigned to a foreign entity lacking "sufficient economic substance". Liability for diverted profits tax is triggered by a declaration by an officer of HM Revenue and Customs; but, controversially, companies are obligated to inform HMRC if they may fall under the charge (s 92). This provision incorporates statutory fines and interest costs into the price. A small or medium-sized enterprise, characterized by a turnover, together with that of any affiliated companies, of less than £10 million, is exempt from diverted gains tax (s 87).
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