Working with clients to help them understand their obligations under the UK’s new Profit Fragmentation rules that came into force from April 2019.
The profit fragmentation legislation that came into force from April 2019 introduced rules for UK businesses that divert profits to offshore jurisdictions with a significantly lower rate of taxation. The targeted anti-avoidance legislation applies to individuals, partnerships and companies undertaking cross-border arrangements between the UK and overseas jurisdictions where in substance the profit arose from activity in the UK but is diverted elsewhere to minimise the tax liability.
The rules require arrangements to be at arm’s length and thus extend the scope of the UK transfer pricing rules to SMEs that may have previously been exempt from UK transfer pricing.
How we can help:
- Support businesses with international arrangements (in particular, in low tax jurisdictions) to understand the implications of the rules and consider whether a tax mismatch arises.
- Help businesses understand their obligations under the rules and determine an arm’s length rate for their transactions where required.
- Advise SMEs (that may have previously been exempt from transfer pricing in the UK) on how the new rules would affect them.