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International Manual - profit fragmentation

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On 24 May, HMRC added a new chapter to its International Manual (INTM610000-INTM610300) concerning the profit fragmentation rules introduced from April 2019 by Finance Act 2019 Sch 4.

These rules target arrangements through which individuals carrying on a trade or profession, including members of a partnership, or UK-resident companies transfer a disproportionate part of their profits to offshore entities in low tax jurisdictions. The arrangements targeted by this legislation will typically involve:

  • business receipts diverted to an offshore entity (typically based in a tax haven), when that entity does not have the substance to earn those profits; or
  • fees and expenses paid to an offshore entity that are much higher than is justified by the work done by that entity.

Where the rules apply, HMRC will counteract the arrangement by attributing the correct amount of profits to the UK-taxable source. See

Issue: 1446
Categories: News