HMRC's record yield of £388m from Diverted Profits Tax

  • Record transfer pricing yield for HMRC, but fewer companies coming forward for advance agreements
  • Three-year wait may be “putting companies off” seeking agreement with HMRC
HMRC's yield from the Diverted Profits Tax (DPT) increased by over a third (38%) to £388 million in 2017/18, up from £281 million in the previous year.

Introduced in 2015, DPT is designed to discourage activities that divert profits away from the UK so that they are not subject to corporation tax, thereby reducing HMRC’s tax yield.

Ken Almand, transfer pricing partner, comments: “Such a dramatic increase in yield from DPT suggests that the Government’s crackdown on tax avoidance by multinationals is paying off.

“George Osborne stole a march on the rest of the world when he introduced the DPT three years ago. This irked the likes of the EU and the OECD who were busy developing a united front against corporate tax avoidance, but HMRC now seems to be reaping the rewards.”

The amount of tax collected by HMRC through transfer pricing disputes has also increased 4% to £1.7 billion in 2017/18, up from £1.6 billion in 2016/17. However, just 16 companies approached the Government last year to negotiate advance pricing agreements for transfer pricing – down from 66 in 2014/15.

Ken Almand adds: “HMRC’s record high yield from transfer pricing disputes may be welcome news for the Government. However, advance agreements, that should be of benefit to companies, are now taking over three years to be agreed with HMRC. This seems to be putting off applicants. It would be welcome if HMRC could look to add to their resources to reduce the length of time these take.”

To discuss any issues relating to diverted profits tax or transfer pricing, please contact Ken Almand.


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