LONDON: New property transactions involving UK resident companies could be caught by the UK’s new diverted profits tax, even though they are not the intended target of the legislation, said John Christian a tax expert at Pinsent Masons.
Christian said that from April this year the proposed new tax, as currently drafted, could apply in some circumstances where a non UK resident company, such as an offshore special purpose vehicle (SPV), has been used in a transaction involving UK land or where there is a UK presence and profits are extracted to offshore owners based in low tax jurisdictions.
A new tax called diverted profits tax (DPT) was announced in the Chancellor’s autumn statement on 3 December last year and draft legislation was published for consultation on 10 December. The government said that DPT is being introduced because it is concerned that multinationals are using “contrived arrangements” to avoid paying their “fair share” of UK tax.
“Unfortunately the draft legislation is not very well drafted so it is not at all clear at present whether it will apply to real estate transactions” John Christian said.
