Key Facts
- •Refinitiv companies received DPT notices totaling approximately £167 million from HMRC.
- •The notices used a "profit-split" method for arm's length pricing.
- •Claimants had a prior Advance Pricing Agreement (APA) with HMRC using a "cost-plus" method for the same services (2008-2014).
- •The dispute centers on whether the DPT notices, using a different method for a later period (2018), were inconsistent with the APA.
- •HMRC argued the APA only applied to the 2008-2014 period, while the claimants argued the APA's effect extended to the 2018 calculation because the 2018 profits were derived in part from services covered by the APA.
Legal Principles
Transfer pricing provisions in Part 4 TIOPA compare actual provisions with arm's length provisions. If the actual provision confers a tax advantage, profits are calculated as if the arm's length provision was made.
Taxation (International and Other Provisions) Act 2010 (TIOPA)
APAs under Part 5 TIOPA have statutory force and replace the provisions in Part 4 to which they relate.
TIOPA
Corporation tax is charged on an accounting period basis.
Corporation Tax Act 2009 (CTA 2009)
Judicial review can succeed if DPT notices are inconsistent with an APA, this can be framed as error of law, abuse of power, or irrationality.
Public Law Principles, Preston v IRC [1985] 1 AC 835
Diverted Profits Tax (DPT) is designed to counter profit diversion to low-tax jurisdictions.
Finance Act 2015 (FA 2015)
Outcomes
Claim dismissed.
The court found no inconsistency between the DPT notices and the APA. The APA's time-limited scope (2008-2014) did not extend to the 2018 accounting period, despite the 2018 profits being partially derived from services covered by the APA. The court interpreted "chargeable period…to which an [APA] relates" in section 220(1) narrowly, meaning only periods explicitly covered by the APA.