INTM489988 - Diverted Profits Tax: imposing a charge – procedure and governance: bringing taxable diverted profits into charge to corporation tax

No taxable diverted profits will arise to a company for an accounting period where that company makes full transfer pricing adjustments to bring the profits into charge to corporation tax before the end of the review period.

The DPT legislation provides an additional opportunity for a company charged to DPT or an avoided permanent establishment to amend its company tax return during the first 14 months of the review period (section 101A/101B Finance Act 2015). This is in addition to the period in which the company can amend its return under Para 15, Schedule 18, Finance Act 1998.

The only way that such an adjustment can be made during the review period is by the company:

  • in accordance with Part 2 of Schedule 18 Finance Act 1998, or
  • using the additional opportunity to amend its return provided by either section 101A or 101B Finance Act 2015, subject to the relevant time limits of those provisions.

A discovery assessment or determination made by HMRC in relation to the diverted profits would not be considered an amount which is taken into account in an assessment to corporation tax which is included in the company’s company tax return

Where an enquiry has been opened into a company’s corporation tax return under Part 4, Schedule 18, Finance Act 1998 and;

  • a charging notice has also been issued under section 95, Finance Act 2015, either to the same company or a different company; and
  • the enquiry covers the same arrangement as the charging notice

HMRC will not generally issue a full closure notice (or partial closure notice in relation to the DPT Matter) during the 30 day period within which the DPT must be paid (section 98, Finance Act 2015) and is explicitly prohibited from doing so during the 15-month review period (section 101, Finance Act 2015). A closure notice may be issued earlier if both parties agree to bring the review period to an early conclusion. Where a customer makes such a request, HMRC will generally agree and will issue a closure notice after the review period has concluded.

HMRC may only issue a full or partial closure notice after the review period has terminated.

If the company does amend its corporation tax return so as to bring the relevant taxable diverted profits into the charge to corporation tax before the end of the review period, the designated HMRC officer will issue an amending notice to reduce the DPT charge, provided the conditions in section 101(3) Finance Act 2015 are met.