Section 85: Section 80 Or 81: Calculation of Profits by Reference to the Relevant Alternative Provision
Summary
1.This section explains how to calculate the taxable diverted profits for an accounting period where section 80 or 81 applies to a company and “the actual provision condition” as defined in section 82 is not met.
Details of the Section
2.Subsection (1) describes when the section will apply. This is where section 80 or 81 applies to a company for an accounting period and “the actual provision condition” as defined in subsection (7) of section 82 is not met.
3.Subsection (2) states that the taxable diverted profits in relation to the material provision are determined by subsections (3) to (5).
4.Subsection (3) determines whether subsection (4) applies. This is where the actual provision condition would have been met apart from the fact that the relative alternative provision would have resulted in relevant taxable income of a company for that company’s corresponding accounting period.
5.Subsection (4) determines the taxable diverted profits where the conditions in subsection (3) are met. These are the additional profits that are described in subsection (2) of section 84, together with the total amount of any relevant taxable income of a connected company for that company’s accounting period that would have resulted from the relevant alternative provision.
6.Subsection (5) determines the taxable diverted profits arising if subsection (4) does not apply. This is calculated according to the method set out in subsection (5)(a) and (b).
7.Subsection (6) defines the “notional additional amount”.
Background Note
8.The diverted profits tax is a new charge on diverted profits. The main objective is to counteract contrived arrangements used by large groups (typically multinational enterprises) that result in the erosion of the UK tax base.
