Profit fragmentation rules set for overhaul

As the government rapidly finalises new rules on profit fragmentation, Lindsey Wicks, tax writer at Croner-I Tax & Accounting, considers the significance of the proposals, particularly the notification requirement which could net thousands of high net worth individuals and business owners

The government is moving at speed to introduce new rules to curb the use of profit fragmentation. Just four weeks after a consultation on profit fragmentation closed, the government published its summary of responses alongside draft legislation and explanatory notes on 6 July 2018.

Aside from changes to the definition of profit fragmentation arrangements, key amendments include:

• the requirement to notify arrangements even if the arrangements have been notified under the disclosure of tax avoidance scheme (DOTAS) rules; and

• the postponement of plans to require an accelerated payment of tax.

The notification requirement is deliberately wide and a notification may or may not lead to counteraction.