INTM489869 - Diverted Profits Tax: customer engagement with HMRC: Advance Pricing Agreements entered into after the introduction of Diverted Profits Tax

For new APAs, HMRC would expect any company entering the APA programme to provide information on the potential for DPT to arise in relation to the covered transactions for the proposed APA. APAs should not be finalised until DPT risk in relation to these transactions has been fully considered. However, the conclusion of an APA does not necessarily mean that a DPT notice will not be issued. HMRC may be willing, where the customer has been open and transparent (including providing a full value chain analysis for all entities that impact the system operating profit that the UK entity contributes to, where relevant) to provide a separate written opinion on the likelihood of whether a DPT notice for a particular period will be issued at the same time, if this is requested.

In cases where it appears that DPT arises in relation to arrangements that would include the proposed covered transactions, HMRC will consider whether it is appropriate to proceed with the APA process. An important factor in considering whether to continue with the APA process will be whether the company intends to leave the arrangements that give rise to DPT in place and if not, what new arrangements are proposed going forward. Unless the proposed arrangements are aimed at removing features that give rise to the DPT exposure there would be little benefit to the company or HMRC in trying to proceed towards APA on those transactions.

Requests for APAs will continue to be considered on the basis of their particular facts and features, in line with the APA Statement of Practice and with regard to the effective use of HMRC’s resources. Where a DPT notice has been (or is about to be) issued in respect of proposed covered transactions, admission of the case into the APA programme is unlikely to be considered appropriate until the DPT position has been reviewed.