Finance Act 2019 introduced a new power for HMRC to counter profit fragmentation. Very broadly, this is to counter either the diversion of profits or assets overseas. On this basis, it is very similar to the Diverted Profits Tax and the Transfer Pricing regimes. The one crucial difference is that both the DPT and the Transfer Pricing regimes effectively excluded small and medium sized entities. This safeguard has been deliberately left outside the new anti-profit fragmentation rules which means that HMRC will be targeting small and medium sized enterprises’ Transfer Pricing issues where HMRC believes that profits have been reduced artificially.
The legislation is effective from the 1stApril 2019 which means that any international transactions will now be under HMRC’s scrutiny.
Primondell runs a series of workshops on Transfer Pricing, Diverted Profits Tax and the new profit fragmentation rules.