New HMRC compliance offensive for ‘Google tax’ set to increase burden on UK’s largest companies

HMRC announced today a major new compliance offensive for the Diverted Profits Tax (DPT) – also dubbed the ‘Google tax’ – that will increase the administrative burden and tax bills for some of the UK’s largest companies.

HMRC will now write to businesses that it believes may have underpaid the Diverted Profits Tax (DPT), based on sophisticated data profiling. This impacts large groups with cross-border transactions or structures typically in low tax jurisdictions.

Businesses will be asked to complete a complex self-analysis exercise to establish how much DPT they owe, if anything. If businesses do not complete this process and are later to be found to have underpaid DPT, they will face significantly higher penalties for non-compliance.

The Diverted Profits Tax was introduced in 2015 and is designed to deter activities that divert profits away from the UK so that they are not subject to corporation tax.

Ken Almand, Transfer Pricing Partner comments: “This is HMRC shining the spotlight on targeted multinationals to prompt a frank disclosure, or face the consequences.

“HMRC will now effectively treat these businesses as ‘guilty until proven innocent.’

“This will be a significant compliance burden for businesses who may have thought that they had dealt with this issue. The Diverted Profits Tax is a notoriously complex and subjective tax, and if businesses get it wrong, they now face potentially severe penalties.”

To discuss the potential impact of this announcement on your business, please contact Ken Almand.


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