11 Feb 2016 12:00 AM

There’s a concern that some property transactions involving non-UK residents will be caught by a new tax proposed by the UK government even though they are not actually the new legislation’s proposed target.

The new tax is called the diverted profits tax (or DPT).  It was announced in the Chancellor's autumn statement on 3 December 2014 because, in the government’s words, there was apprehension some of the multinationals generating profit in the UK are using increasingly contrived structures to avoid paying a "fair share" of UK tax.

From the draft legislation it looks as though DPT could pose problems for some property transactions with deals involving companies owned by a non-UK resident company buying or selling UK land or deals where the profits are being sent onto non-UK residents in regions with lower taxation looking the most likely to receive scrutiny.

The only problem is the draft legislation is a little confusing, particularly around some of the terminology which doesn’t clearly differentiate between tax and more specific VAT terminology or offer a clear definition as to exactly what is counted as ‘goods and services’ when it comes to appropriating taxable profits.

However as DPT will apply to any diverted profits arising on or after 1 April 2015, it looks like companies will include mention of any diverted profits when they send their regular notification to HMRC within three months of the end of their current accounting period.

If you have any questions regarding the profits you will be including in your notification to HMRC or would like to talk through how DPT may affect your business going forward in more detail (and of course how to make sure you minimise that potential effect), please contact David Gibbs.


David Snell

Formally a Partner at Alliotts