Section 79: Charge to Tax
Summary
1.This section introduces the diverted profits tax, a new and separate tax which will be charged at a main rate of 25% on a company’s taxable diverted profits from 1 April 2015. Where a company’s taxable diverted profits are “adjusted ring fence profits” or “notional adjusted ring fence profits” (as defined), the main rate does not apply and a special rate of 55% is applied.
Details of the Section
2.Subsection (1) specifies how a charge to the tax is imposed. It can only be imposed by a designated HM Revenue & Customs officer issuing a charging notice or supplementary charging notice to a company for an accounting period.
3.Subsection (2) provides for the tax charged to be at a rate of 25% of the amount of taxable diverted profits (but see subsection (3)), and to include any interest on that amount (see subsection (4)).
4.Subsection (3) modifies subsection (4) where the company’s taxable diverted profits are “adjusted ring fence profits” or “notional adjusted ring fence profits” (as defined in subsection (6)). In those circumstances, the tax is charged at a rate of 55%.
5.Subsection (4) describes how and for what period any interest charged under subsection (4)(b) is to be calculated.
6.Subsection (5) defines “adjusted ring fence profits” by reference to section 330 of CTA 2010 (the ring fence profits of an oil or gas trade). The subsection also defines “notional adjusted ring fence profits” by reference to the provisions of section 85 and on the basis of the assumptions set out at subparagraphs (a) and (b).
Background Note
7.The diverted profits tax is a new charge on diverted profits. The main objective is to counteract contrived arrangements used by large groups (typically multinational enterprises) that result in the erosion of the UK tax base.
