INTM610240 - Double Taxation

Paragraph 8 Schedule 4 Finance Act 2019 sets out the double taxation provisions that will apply to Profit Fragmentation adjustments to ensure that the amounts involved are not taxed more than once.

The double taxation provisions apply where the following conditions are met:

  • The resident party has paid a relevant tax by virtue of the application of the Profit Fragmentation legislation.
  • At any time the relevant party or another person pays a further amount of the relevant tax or an amount of non-UK tax corresponding to the relevant tax.
  • The additional tax paid results in double taxation calculated by reference to the same income or profits.

If these conditions are met then the resident party may make a claim and consequential adjustments may be made by an officer of HMRC. The definition of relevant tax is the same as for the tax mismatch test, more details of which can be found here INTM610150.

Consequential Adjustments

If a claim has been made by the resident party that meets all of the conditions detailed above then an officer of HMRC must make consequential adjustments to eliminate any double taxation. These must be made on a just and reasonable basis.

The consequential adjustment must not exceed the lesser of the relevant tax paid by the resident party under the Profit Fragmentation legislation and the further amount of the relevant tax or non-UK tax corresponding to the relevant tax paid by the other person.

Consequential adjustments may be made:

  • in respect of any tax period,
  • by way of an assessment, the modification of an assessment, the amendment of a claim or otherwise, and
  • despite any time limit imposed by or under any enactment.

The consequential adjustments may be made to avoid a double payment of tax that arises from any adjustments that have been made in order to counteract any tax advantages arising from the Profit Fragmentation arrangements that remain after the application of other provisions as described above. If other existing rules are applicable – such as the Transfer Pricing rules – adjustments will be made under those rules in the first instance and double taxation relief should be sought following the application of those existing rules.

If a customer would like to claim double taxation relief under paragraph 8 they should contact HMRC quoting this page of guidance. If you receive a claim in relation to Profit Fragmentation Arrangements please contact the Profit Fragmentation Single Points of Contact (SPOCs) in the Customer Compliance Group.