U.K. Budget Includes Diverted Profits Tax | KPMG | CA

U.K. Budget Includes "Diverted Profits Tax" for Multinationals

U.K. Budget Includes "Diverted Profits Tax"

The U.K. government presented its 2015 budget on March 18, 2015.

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The U.K. government presented its 2015 budget on March 18, 2015. Only a few major tax measures were announced in the budget, including the government's previously proposed "diverted profits tax". This tax targets non-resident entities with substantial U.K. activities that deliberately avoid establishing a U.K. taxable presence.

Diverted profits tax

The new 25% diverted profits tax is separate from corporation tax and is aimed at multinationals entering into "contrived arrangements" to divert profits from the U.K. This tax will affect non-U.K. resident groups that make sales of more than £10 million to U.K. customers and companies that achieve an effective tax rate benefit through payments to group companies. The budget confirms that this "BEPS-friendly" tax will take effect on April 1, 2015.

Selected budget measures

Highlights of other anti-avoidance and tax-raising measures in the 2015 U.K. budget are as follows. The budget:

  • Confirms that capital gains tax will be extended to non-residents of the U.K. on the disposal of U.K. residential property (effective from April 2015)
  • Legislates country-by-country reporting requirements under BEPS
  • Introduces anti-avoidance measures to prevent refreshing of corporate tax losses.

Budget measures to be enacted before May 7 election?

A Finance Bill to enact the budget measures will be published on March 24. However, due to an election coming up on May 7, the U.K. Parliament is scheduled to be dissolved on March 30. As such, the Finance Bill will have less than a week to be passed into law.

For more information, contact your KPMG adviser.

Disclaimer

Information is current to March 24, 2015. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

For more information, contact KPMG's National Tax Centre at 416.777.8500

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