INTM489888 - Diverted Profits Tax: notification, charging and payment: situations where notification is not required

The notification requirement is intended to alert HMRC to situations where there is a significant likelihood that DPT is chargeable and where HMRC does not already know about the arrangements which give rise to it.

Accordingly, a company is not required to notify HMRC that it may potentially be within the scope of DPT if it falls within one of the specifically exempt situations listed below:

• (i) it is reasonable to assume that, although a company is potentially within the scope of DPT, no charge to DPT would arise for the current period (see further guidance below). However, the possibility that a company may make a future transfer pricing adjustment is specifically excluded from being grounds to assume that no charge to DPT would arise. A future transfer pricing adjustment includes a transfer pricing adjustment in a company tax return which has not yet been filed even if the accounting period to which it pertains has ended.
• (ii) before the end of the notification period, HMRC has confirmed that the company does not have to notify because either the company, or a company connected with it, has provided sufficient information to inform the designated officer’s decision about whether or not to issue a preliminary notice, and that HMRC has examined that information (whether as part of an enquiry into a return or otherwise).
• (iii) at the end of the notification period, it is reasonable for the company to assume that either the company, or a company connected with it, has provided sufficient information to inform the designated officer’s decision about whether or not to issue a preliminary notice, and that HMRC has examined that information (whether as part of an enquiry into a return or otherwise). For example, if information has been provided as part of an enquiry and either the company’s circumstances have not materially changed, or the contrived arrangements have been unwound the company would not need to make a notification.
• (iv) the company has already notified that it is potentially within the scope of DPT for the immediately preceding accounting period and it is reasonable for the company to assume that there has been no change in the relevant circumstances.
• (v) the company has not notified that it is potentially within the scope of DPT for the immediately preceding accounting period on the grounds that HMRC has confirmed that it has provided HMRC with sufficient information as set out in (ii) above (or it is reasonable for the company to conclude as set out in (iii) above) and, in either case, it is reasonable for the company to assume that there has been no change in the relevant circumstances.
• (vi) HMRC may also direct that the duty to notify is removed in other defined circumstances and will publish the details of all such directions, if and when they are made.

It is important to note that these exemptions apply only for the purposes of determining whether or not a company potentially within the scope of DPT must notify HMRC accordingly. They do not mean that a liability to DPT cannot arise. A company that is not required to notify on the basis of these exemptions, including cases where the company has received confirmation from an HMRC officer that no notification is required, may still have a liability to DPT and be subject to the charging and other provisions.

As mentioned at (i) above, it is open for a company to reasonably assume that no charge to DPT will arise. This may be so even though the conditions for a charge, such as the tax mismatch and insufficient substance conditions, appear to be met and the transfer pricing or PE attribution analysis has not been examined by HMRC.

In reaching its conclusion in those circumstances, a company would be expected to have satisfied itself that its transfer pricing or PE attribution analysis is robust and takes into account all relevant matters at the level of detail appropriate to the transfer pricing/PE attribution issues in question.

The company would also be expected to have considered whether, for the purposes of calculating any DPT charge in relation to a particular provision, it would be reasonable to assume that an alternative provision would have been made or imposed if tax on income had not been a relevant consideration for any person at any time (see INTM489630, INTM489645, INTM489700 and INTM489715). The appropriate level of consideration will of course depend on the nature and materiality of the issues in question, following common sense principles of what is reasonable.