New section 1305A of the Corporation Tax Act 2009, inserted by the Finance Act 2014, is now in force and has retrospective effect in respect of payments made on or after 19 March 2014. The new measure applies where:

  • two companies (A and B) are part of the same “group”
  • A and B are party to “arrangements”
  • the arrangements result, in substance, in A (directly or indirectly) making a payment to B of “all or a significant part” of A’s profits (the profit transfer)
  • one of the main purposes of the arrangements is to secure a “tax advantage”

If the new measure applies, A’s profits are recalculated for corporation tax purposes as though the profit transfer had not taken place.

On 24 July 2014, HMRC published revised guidance on the new measure.

The revised guidance considers certain situations in greater detail and includes a number of examples setting out HMRC’s views as to when the new measure is, and is not, likely to apply.

To read our tax alert on the amendments click here

To read the amended guidance note click here