UK “diverted profits tax” an issue for Jersey

Thursday 02 April 2015

A new UK tax targeting tech giants like Google is likely to affect Jersey companies selling into the UK market, according to a local tax expert.

The Diverted Profits Tax came into effect yesterday, aimed at huge companies that shift profits around to reduce their overall tax bill in the countries in which they operate.

And now PwC are warning that the tax is “widely drafted, complex to apply and elements are subjective”. They say that Jersey companies need to carefully consider exactly what the 25% tax might mean for them.

Debbie Payne, Tax Director and asset management specialist at PwC CI, said: “Its application is far wider than originally envisaged, and it is likely to affect Jersey companies selling into the UK and those with arrangements with related companies in Jersey where HMRC consider there is a lack of economic substance.

“There’s also a duty to notify HMRC if you’re potentially within the scope of the tax.

“It is therefore essential for businesses to understand the rules and to consider whether the tax could apply to their business model, particularly where they have related entities based in the UK or staff who regularly travel to the UK for work purposes.

“Understanding these changes is essential to enable you to assess your exposure to tax risk, and to ensure that steps are taken to minimise the impact of these changes on your business model.”