A new section 1305A of the UK Corporation Tax Act 2009 (CTA 2009) has been introduced by the UK Finance Act 2014 that applies to payments made from March 19, 2014 under avoidance schemes involving the transfer of corporate profits within a group.
This new measure applies if:
- two companies (“A” and “B”) are members of the same “group”;
- A and B are party to “arrangements” (whether or not at the same time);
- the arrangements equate to, in essence, A (directly/indirectly) paying B “all or a significant part” of A’s profits (the “profit transfer”); and
- one of the main purposes is to gain a “tax advantage”.
If applicable, the profits of A are reassessed for corporation tax on the basis that the profit transfer did not occur.
HM Revenue & Customs (HMRC) released amended guidance on the section on July 24. Groups should examine any arrangements with UK based members to ensure they are not caught by this new anti-avoidance measure.Continue Reading...