INTM489310 - The Unassessed Transfer Pricing Profits Practical Guidance: Diverted Profits Tax (DPT) and UTPP
Source: gov.uk (2025-12-04)


UTPP will apply to accounting periods beginning on or after 1 January 2026. This guidance will be updated with detailed examples by 1 January 2026. For earlier accounting periods please use the diverted profits tax guidance at INTM489500 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm489500)

Diverted Profits Tax (DPT) was introduced in Finance Act 2015. It was a unilateral measure targeted at two types of arrangements to divert profits from the UK:
- the use of entities or transactions lacking economic substance to exploit tax mismatches (s80/81 FA15), and
- contrived arrangements to avoid a UK permanent establishment of a foreign trading company (s86 FA15)
When DPT was introduced, it was designed to be a new tax which was distinct from corporation tax and therefore outside the scope of the UK's tax treaties.

Replacing DPT with UTPP and bringing it into the corporation tax framework simplifies the interaction with the transfer pricing rules and facilitates a consistent approach under treaties.

UTPP targets the same types of arrangements as DPT and maintains key aspects of the DPT regime, including the use of preliminary notices and assessments with upfront payment, whilst aligning with the corporation tax framework.

For more information on DPT see INTM489500 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm489500).

Comparison of DPT and UTPP

DPT

UTPP

Tax Regime

Separate tax outside the Corporation Tax regime

Incorporated within Corporation Tax regime

Notification

Mandatory notification within 3 months of year-end if potentially in scope

No notification

Charging Provisions

3 charging provisions - s80 FA15 and s81 FA15 for UK resident companies and permanent establishments s86 FA15 for foreign companies

1 charging provision - S217A applies to UK resident companies, UK permanent establishments and non-residents dealing in UK land or property

HMRC and Company Amendments

HMRC can increase its assessment until the last 30 days of the review period. Companies can amend their self-assessment up to the last 30 days.

HMRC can increase its assessment until the last 30 days of the review period. Companies can amend their self-assessment up to the last 21 days of the period of amendments, so that the amendment can reflect HMRC’s view on the maximum UTPP charge.

Effective Tax Mismatch Outcome (ETMO)

There is an ETMO where the increase in tax payable by the second party to the provision is less than 80% of the UK tax reduction.

The UK tax reduction is calculated using the statutory UK corporation tax rate, regardless of any losses or other reliefs available.

The increase in foreign tax is calculated by reference to qualifying deductions or qualifying losses

There is an ETMO if the amount of tax due and payable by the other party to the provision is less than 80% of the UK corporation tax that would otherwise be charged.

Where the other party to the provision is a transparent entity the ETMO is assumed to be met and the legislation provides an additional 30 days for the company to make representations that there is no ETMO

Purposive Gateway

The Insufficient Economic Substance Condition (IESC) is satisfied where it is reasonable to assume that the arrangements were designed to obtain the tax reduction identified by the ETMO

The Tax Design Condition (TDC) will be met if it is reasonable to assume that the structure of the transactions, or wider arrangements giving rise to the unassessed transfer pricing profits were designed to reduce, eliminate or delay UK tax liability

Treaty Interaction

A separate and distinct tax outside of double taxation treaties

Part of the CT regime, and so a covered tax in UK double taxation treaties