INTM489750 - Diverted Profits Tax: application of Diverted Profits Tax: legislation – Finance Act 2015 – core provisions: the effective tax mismatch outcome – exempted payments

An effective tax mismatch outcome is exempt if it arises solely from payments to certain bodies (charities, pension schemes, persons exempt from tax by reason of sovereign immunity, and funds the investors in which are charities, pension schemes or sovereign-immune persons) where they meet the criteria of the legislation.

These exemptions are meant to ensure that genuine commercial arrangements involving such parties in the circumstances outlined are not impacted. In any cases where these exemptions are exploited in order to facilitate profit diversion HMRC will seek to deny the benefit of the exemption, including where appropriate through use of the General Anti-Abuse Rule (GAAR).

More generally, HMRC would seek to apply anti-avoidance provisions, including the GAAR, to contrived attempts to circumvent the DPT legislation.