The UK government will adopt legislative amendments to include the diverted profits tax among the taxes for which relief may be granted under the mutual agreement procedure (MAP) of an applicable tax treaty, according to an October 27 policy paper released in connection with Autumn Budget 2021.
A related measure will address the diverted profits tax’s interaction with corporation tax closure notices and certain relieving provisions.
The diverted profits tax, introduced in 2015, aims to counteract certain arrangements that are used by some multinational enterprises to divert profits from the UK tax base. Some large multinational enterprises with business activities in the UK have become subject to the diverted profits tax and have sought relief under the mutual agreement procedure of an applicable tax treaty.
The new MAP measure will allow such relief from the diverted profits tax to be given under a mutual agreement procedure in accordance with an applicable treaty. The measure will be introduced in Finance Bill 2021-22 and will be effective for MAP decisions reached after October 27, 2021.
The additional diverted profits tax measure will amend applicable legislation to ensure that customers can still use certain relieving provisions to amend their company tax returns and bring taxable diverted profits into charge to corporation tax during the diverted profits tax review period. It will also ensure that provisions on the interaction between the diverted profits tax review periods and what happens when a corporation tax enquiry is closed function as intended.
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