INTM489595 - Diverted Profits Tax: application of Diverted Profits Tax: legislation 鈥� Finance Act 2015 鈥� core provisions: section 80 - involvement of entities or transactions lacking economic substance - situation 1 - UK company
A UK resident company may incur a charge to DPT if it is party to an arrangement meeting the specific conditions set out in section 80. The rules operate by reference to the concept of 鈥減rovision鈥�, which is consistent with the description of 鈥減rovision鈥� in the transfer pricing rules at Part 4 TIOPA 2010 (see INTM412050). The provision must be made or imposed between a UK resident company and another person (P). There is no requirement that this other person is a company. 鈥淧erson鈥� is defined further in INTM412030, but can include a partnership, or limited liability partnership.
The conditions set out in section 80 are that:
- there is a company (C) that is UK resident and another person (P) whether or not UK resident;
- provision (鈥渢he material provision鈥�) has been made or imposed as between C and P by means of a transaction or series of transactions (INTM489600);
- C and P are connected in accordance with the participation condition (INTM489725);
- the material provision must result in 鈥渁n effective tax mismatch outcome鈥� between C and P (INTM489740);
- the effective tax mismatch outcome is not an excepted loan relationship outcome (INTM489605);
- the 鈥渋nsufficient economic substance condition鈥� is met (INTM489765);
- C and P are not both small or medium-sized enterprises within the definition of section 172 TIOPA 2010 (INTM412080) (INTM489610).