INTM489892 | Diverted Profits Tax: notification, charging and payment: failure to notify penalties

The measure of tax on which the penalty is based is the amount of DPT which would be charged had a notice been issued 6 months after the end of the accounting period and payable at that time.

The assumption in Para 7(4A) Sch 41 FA 2008 is that DPT must be paid within six months of the end of the accounting period. Therefore, six months after the end of the accounting period is treated as the date when DPT first becomes unpaid by reason of the company’s failure to notify (FTN) as potentially within scope of DPT for the purposes of Sch 41 FA 2008 (see INTM489886). In non-deliberate FTN cases this is the relevant date, when considering whether HMRC has become aware of the failure within 12 months of the tax first becoming unpaid by reason of the failure, to determine whether the greater penalty reduction applies.

The fact a transfer pricing settlement was reached later does not mean the arrangements in question were not within the scope of DPT. Settling a DPT case by making a full transfer pricing adjustment to bring the taxable diverted profits into charge does not preclude HMRC from charging a failure to notify penalty if one is due.