Corporation Tax Act 2009 section 18H

What are "diverted profits"?

Section 18H defines "diverted profits" for the purposes of the anti-diversion rule and explains how to determine whether a company's profits qualify as diverted.

• Diverted profits are the portion of a company's total profits that pass through the "diverted profits gateway", which borrows its framework from the controlled foreign companies (CFC) charge gateway rules
• To apply the gateway test, you treat the company as if it were a CFC resident in the relevant territory, with its accounting period and total profits standing in for the CFC equivalents — but without assuming any change to where the company actually carries on its activities
• The CFC charge gateway provisions in TIOPA 2010 are applied with modifications: Chapter 8 of Part 9A is excluded, references to the CFC charge gateway are read as references to the diverted profits gateway, and further adjustments are made by sections 18HA to 18HE
• Total profits for this purpose are calculated ignoring the anti-diversion rules themselves and ignoring step 2 in section 4(3) of CTA 2010 (which deals with the deduction of reliefs from total profits)