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FA 2019: profit fragmentation

FA 2019 Sch 4 introduces targeted rules to tax arrangements through which UK resident individuals (or in some cases companies) carrying on a business transfer a disproportionate part of their profits to offshore entities in low-tax jurisdictions and whereby the individual or a related individual gets or could get some kind of benefit from the value transferred.

The new rules apply to transfers of values from 1 April 2019 for corporation tax purposes and from 6 April 2019 for income tax. They will catch profits accruing after those dates in relation to existing structures. If the rules apply just and reasonable adjustments will be made to the UK resident’s expenses income profits or losses to counteract any tax advantages based on what the value transferred would have been if independent parties acting at arm’s length had been involved.

HMRC has given an example of one of...

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