Broadly, the first circumstance where a charge to DPT can arise is where profits are diverted (through any expenditure, or income diversion) from a UK-based company (ie UK resident, or non-UK resident with a UK trading permanent establishment presence) under arrangements with connected persons that 'lack economic substance' (see D2.707).
Where a DPT charge may potentially arise under the lack of economic substance rule1, there is an overriding exemption2 for small and medium enterprises (SMEs). Both the company and the other person must be SMEs for the period for the provision between the two parties to
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