By Paul Rutherford, partner, London
The UK Government intends to introduce a 25% “diverted profits tax” (DPT) from 1 April 2015.
The tax is designed to catch the artificial erosion of the UK corporate tax base by multi-nationals that avoid establishing a fixed place of business here in the UK (a “permanent establishment” or “PE”) or that divert UK profits to related parties in lower-tax jurisdictions. In its current form, the DPT could catch multi-nationals which implement conduit arrangements (such as the “double Irish” structure) or supply chain management structures that shift profits out of the UK. Certain sectors are most likely to be impacted, including multi-national groups operating in the technology, distribution, media & entertainment, advertising, gaming, retail and hospitality sectors. Many of those groups will ultimately be owned in the USA. Existing structures will need to be reviewed before 1 April 2015 and where appropriate, corrective action taken.
The draft legislation has been released for public consultation, so multi-nationals should take the opportunity to make representations to the UK Government. For further information, please click here.
To discuss this topic with a member of the DLA Piper Tax Team, please contact: