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Profit fragmentation arrangements

B4.208 Tax adjustments to counteract profit fragmentation arrangements

From 1 April 2019, or 6 April 2019 for non-corporates,¹ targeted anti-avoidance legislation applies to counter arrangements which involve a 'fragmentation of profit' between two or more jurisdictions if the profit is in substance derived from activity in the UK².

The rules are widely drawn and encompass companies and individuals, including those in partnership³.

The avoidance which is targeted by these provisions typically involves some or all of the profits of a UK business being diverted to an offshore entity which pays little or no tax. The entity might, for example, be an offshore company owned by an offshore trust. The UK trader would not necessarily be a settlor or trustee of that trust and may even be excluded from benefitting from the trust assets, but there will be some means by which amounts can accrue to him or to persons linked to him. It is