DPT ― entities or transactions lacking economic substance

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

A charge to diverted profits tax (DPT) for an accounting period can arise if one or more of the following three scenarios apply:

•
a UK company uses entities or transactions which lack economic substance
•
a non-UK company uses entities or transactions which lack economic substance
•
a non-UK company avoids creating a UK permanent establishment (PE)

FA 2015, s 77(2)

This guidance note sets out details of the charge to DPT in respect of the first two scenarios. Detailed examples of section 80 and section 81 cases can be found in HMRC’s guidance at INTM489780 onwards, including the application to particular types of assets and industries.

See the DPT ― avoidance of UK permanent establishment guidance note for details of the charge arising in the third scenario.

FA 2015, ss 80 and 81 are an extension of the UK transfer pricing provisions in situations where profits are diverted from a company with a UK corporation tax presence, to related persons (related by the ‘participation condition’ set out below),

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