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Autumn Statement 2014 - Andrew Prowse's contribution to PLC's Leading Experts Article

In his Autumn Statement speech, the Chancellor sought to capitalise on the popular moral indignation about "multinational businesses" avoiding their "fair share" of tax. His new Diverted Profits Tax In his Autumn Statement speech, the Chancellor sought to capitalise on the popular moral indignation about "multinational businesses" avoiding their "fair share" of tax. His new Diverted Profits Tax will, he said, raise over £1 billion over the next 5 years. That is perhaps a relatively modest sum, although that may be because the Treasury expects the corporation tax take to increase as companies adopt more straightforward business structures in response to the new rules.

The Autumn Statement itself introduced the DPT under the sub-heading "Tackling tax avoidance", and referred to "the use of aggressive tax planning to avoid paying tax in the UK" ("aggressive" has become the word of choice lately). The tone was clear.

It remains to be seen how the DPT will fare under EU freedom of establishment and movement of capital rules and how it will interact with double tax agreements and comparable measures expected to be proposed by the OECD only next year - the system risks becoming fiendishly complex.

The DPT draft legislation and guidance, published on 10 December, bear detailed scrutiny (the Office of Tax Simplification may be having palpitations!), but, if fairness is the order of the day, some more work is needed. First, the taxpayer itself must notify HMRC if it is potentially within the scope of DPT (within 3 months of the end of its accounting period), and then HMRC gets a generous 2 years to issue a notice of chargeability. Moreover, the company then has a mere 30 days to make representations (which in effect are restricted because HMRC can only consider representations on certain matters)! That is absurd in the context of a multinational structure. HMRC then can assess the appropriate imputed amounts and consequent DPT. If HMRC issues a charging notice, then the tax must be paid within 30 days even if a review is to be sought and an appeal is expected to be made – the tax cannot be postponed on any grounds: fair's fair (or maybe not!).

Whilst entirely understandable, both politically (having regard to the heightened public consciousness of tax planning) and economically, it is unfortunate that such an important and complex measure will be rushed through in Finance Act 2015.

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