Finance (No. 2) Act 2023

• (5) For the purposes of section 229D (but not for the purposes of section 229E), where a member of a multinational group is a flow-through entity, employees of the entity—

• (a) are to be treated as employees of members of the group that are not flow-through entities that are located in the territory in which the flow-through entity was created, or

• (b) where there are no such members in that territory, are ignored for the purposes of this Chapter.

• (6) Subsection (5) does not apply to employees of a flow-through entity that are regarded for the purposes of this section as employees of a permanent establishment of the entity.

• (7) Where a permanent establishment does not prepare separate financial accounts, the reference in subsection (3) to employment costs recorded in financial statements is to the employment costs that would have been so recorded had such statements been prepared (and those costs are to be excluded from the financial statements of the main entity for the purposes of applying this section).

Value of tangible fixed assets

229H

• (1) To determine the value of tangible fixed assets of a qualifying member of a multinational group for an accounting period—

• (a) add together—

• (i) the sum of the values of each tangible fixed asset held by the member at the start of the period, as those values are recorded in the member’s financial statements, and

• (ii) the sum of the values of each tangible fixed asset held by the member at the end of the period, as those values are recorded in the member’s financial statements, and

• (b) divide the result of paragraph (a) by 2.

• (2) For the purposes of subsection (1) financial statements are “appropriate” only if the basis on which they are prepared is consistent for all members of the group (wherever located).

• (3) In each case the value of a tangible fixed asset is to include accumulated depreciation, depletion or impairment.

• (4) If the member is not a member of the group at the start of the period, or at the end of the period, the sum of the values of its tangible fixed assets at that time is to be treated as nil.

• (5) For the purpose of subsection (4), ignore section 208(2) (members joining or leaving group in an accounting period treated as members for the whole of the period).

• (6) Where a permanent establishment does not prepare separate financial accounts, the values to be used are those that would have been recorded in those accounts had they been prepared (and those values are to be excluded from the financial statements of the main entity for the purposes of applying this section).

• (7) For the purposes of section 229D (but not for the purposes of section 229E), tangible fixed assets held by a member of the group that is a flow-through entity—

• (a) are to be treated as held by members of the group that are not flow-through entities that are located in the territory in which the flow-through entity was created, or

• (b) where there are no such members in that territory, are to be ignored for the purposes of this Chapter.

• (8) Subsection (7) does not apply to assets of a flow-through entity that are held by a permanent establishment of the entity.

• (9) For the purposes of this Chapter “tangible fixed assets” means all tangible assets wherever located, other than cash or cash equivalents or financial assets.

Joint ventures

References to responsible members

229I

• (1) This section applies where—

• (a) the ultimate parent of a multinational group is not subject to Pillar Two IIR tax for an accounting period,

• (b) the group includes a joint venture group, and

• (c) the members of the joint venture group are undertaxed in relation to the multinational group for that period.

• (2) The members of a joint venture group are undertaxed in relation to a multinational group if—

• (a) the sum of amounts attributed to responsible members of the multinational group under Chapter 7 in respect of members of the joint venture group’s top-up amount and additional top-up amounts, is less than

• (b) the sum of such amounts in respect of the joint venture group that would be attributed under that Chapter to the ultimate parent of the multinational group if it were subject to Pillar Two IIR tax.

• (3) The amount given by subtracting the amounts mentioned in paragraph (a) of subsection (2) from the amounts mentioned in paragraph (b) of that subsection is an untaxed amount of the joint venture group in relation to the multinational group.

• (4) Sections 229C to 229F (allocation of untaxed amounts) apply for the purposes of allocating an untaxed amount of a joint venture group in relation to a multinational group to qualifying members of that multinational group as they apply to the allocation of an untaxed amount of a member of the multinational group to those members.

References to responsible members

229J

• (1) For the purpose of determining untaxed amounts of a member of a multinational group who is located in a territory in which a DIIR is in force, references in this Chapter to a responsible member are to be interpreted as if section 128 (responsible members) had effect with the following modifications—

• (a) in subsection (2) omit “that are not located in the territory the ultimate parent is located in”;

• (b) in subsection (3)(c), at the beginning insert “the intermediate parent,”;

• (c) in subsection (4) omit “that are not located in the territory it is located in”;

• (d) in subsection (5)(b), at the beginning insert “it or”;

• (e) in subsection (6) omit “that are not located in the same territory it is located in”;

but this is subject to subsection (2).

• (2) For the purpose of determining whether the top-up amount and additional top-up amounts of a member (“M”) of a multinational group for an accounting period are “potentially undertaxed”, a member of the group which—

• (a) is located in the same territory as M, and

• (b) would apart from this subsection be a responsible member,

is to be regarded for all purposes of this Chapter as not being a responsible member unless a DIIR is in force for the accounting period in that territory.

• (3) In this section “DIIR” means a tax which—

• (a) implements, in a Pillar Two territory, rules relating to top-up tax under the IIR (within the meaning of the Pillar Two rules), and

• (b) is designed so that tax charged under it is not limited to tax in respect of members who are located outside that territory.

Benchmark amount

Attribution of generation

Generation receipts

Allowable costs

Exceptional generation fuel costs

Exceptional revenue sharing costs

Groups

Lead member of a group and its qualifying periods

Liability of members of groups

Election for members with significant minority shareholding to pay levy

Qualifying partnerships

Qualifying joint ventures

Non-chargeable amounts of joint venture to be attributed to participants

Generation acquired and supplied by JV participants

Arrangements that reflect receipts (JV participants)

Generation acquired and supplied by significant minority shareholders

Arrangements that reflect receipts (significant minority shareholders)

Surrender of shortfalls

Amount that may be surrendered and use of that amount

Effect of company being transparent

Requirement to provide information about payments

Claims to shortfall amounts

Application of Part 5A of TMA 1970 and Instalment Payments Regulations

Anti-avoidance

Transactions funded with the assistance of a public subsidy

Deposit schemes

Dumping, subsidisation and safeguarding remedies

Rulings as to method of valuation of goods

Excepted machines etc

Rates of tobacco products duty

Flavour concentrates

New bands and rates

Northern Ireland rates

Rates of vehicle excise duty

Reform of HGV road user levy

End of exempt period for HGV road user levy

Rates of landfill tax

Rates of climate change levy

Rate of plastic packaging tax

Aggregates levy: exemptions and exploitation

Designation of sites

Sunset date for reliefs

Right to repayment of income tax to be inalienable

Penalties for failure to pay value added tax

VAT credits: repayment interest due where evidence not provided

Insurance premium tax: power to make regulations about notifications

Penalties for failure to make payments of plastic packaging tax on time

Approval of aerodromes

Approved aerodromes: minor and consequential amendments

Temporary approvals etc

Licensing authorities: requirements to give or obtain tax information

Section 342: consequential amendments

Definition of “charity” restricted to UK charities

Definition of “community amateur sports club” restricted to UK clubs

Exemptions from tax

Abolition of the Office of Tax Simplification

Pension benefits and inheritance tax

Payment of unclaimed money in court into the Consolidated Fund

Financial sanctions regulations: prohibition on certain payments by HMRC

Communications data

Interpretation

Short title

Requirement to make claim notifications in relation to certain R&D claims

Relief for R&D expenditure on data and cloud computing

Relief for R&D expenditure on data and cloud computing: consequential amendments

Introduction

Power of HMRC to collect overpaid R&D tax relief or expenditure credit

Time limits for R&D claims

Requirement to provide additional information in relation to R&D claims

Power of HMRC to remove R&D claims made in error from return

Amendment of CTA 2009

R&D tax relief: circumstances in which enterprises are treated as SMEs

Accounts treated as prepared on going concern basis

Meaning of expenditure incurred on payments

The applicable rate for grossing up basic amounts of estate income

The applicable rate for grossing up for determining shares in an estate in the final tax year

Income from stock dividends etc treated as bearing income tax at 0%

Income treated as dividend income and savings income

Order in which basic amounts are treated as paid from aggregate income

The applicable rate for grossing up basic amounts of estate income

The applicable rate for grossing up for determining shares in an estate in the final tax year

Income from stock dividends etc treated as bearing income tax at 0%

Order in which basic amounts are treated as paid from aggregate income

Low income estates and trusts: tax liability of personal representatives and trustees

Low income estates: tax liability of beneficiaries

Low income estates: tax liability of beneficiaries

Introduction

Tax-interest expense amounts of a company: charities

First period of account where new holding company

Amounts not brought into account in determining a company’s tax-EBITDA

“Relevant expense amount” and “relevant income amount”

Adjusted net group-interest expense: debits referable to times before UK property business etc carried on

Adjusted net group-interest expense: debits in respect of pre-trading expenditure

Qualifying net group-interest expense: meaning of “equity notes”

Interest allowance (non-consolidated investment) election: “non-consolidated associate”

Public infrastructure

Partnerships and other transparent entities

Investments held by investment managers

Determining the worldwide group: “non-consolidated subsidiary” and “consolidated subsidiary”

Appointment of a reporting company by Revenue and Customs

Revised interest restriction return

Enquiry into interest restriction return

Determinations by officers of Revenue and Customs

Consequential claims to company tax returns

Penalties for errors: CIR alterations to be ignored in calculating potential lost revenue

Disapplication of carry forward rule for deficits

Defined expressions used in Part 10 of TIOPA 2010: “insurance company”

Genuine diversity of ownership

Amendment of CTA 2010

REITs involving single commercial property

3-year development rule

Genuine diversity of ownership

Amendment of the Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006

Amendment of Schedule 2 to FA 2022

Securitisation companies unable to be QAHCs

Beneficial entitlement held only through QAHCs

Determining relevant interests

Dealing with bodies corporate without share capital

Genuine diversity of ownership

Investment strategy condition

Alternative finance arrangements

Records to be kept for the purposes of corporation tax

Assessments relating to corporation tax

Records to be kept for the purposes of income tax

Assessments relating to income tax

Penalties for errors

Information and inspection powers

Beer

Long term elections

Annual elections

Intra-group transfers before entry into regime

4A

• (1) This paragraph applies in relation to accounts or financial statements (“the relevant statements”) in relation to a multinational group in a territory that—

• (a) fall within paragraph (a) or (b) of paragraph 4(1), and

• (b) reflect purchase price accounting adjustments.

• (2) If—

• (a) a country-by-country report has been submitted in respect of the group in that territory in respect of a period commencing on or after 1 January 2023 and concluding before the commencement of the accounting period for which the transitional safe harbour election is being made,

• (b) the financial accounts used for the preparation of that report did not reflect purchase price accounting adjustments, and

• (c) there is no requirement to reflect purchase price adjustments in the relevant statements under the law of the territory that applies in relation to the preparation of those statements,

the relevant statements are not qualified financial statements.

• (3) Sub-paragraph (4) applies if—

• (a) the relevant statements are qualified financial statements, and

• (b) an impairment of goodwill in relation to a transaction entered into on or after 1 December 2021 is reflected in a member’s profit (loss) before income tax.

• (4) Adjust the profit (loss) before income tax of the member so that it does not reflect that impairment for the purposes of determining—

• (a) in a case where the condition in sub-paragraph (5) is not met, whether the simplified effective tax rate test is met (see paragraph 8), and

• (b) in any case, whether the routine profits test is met (see paragraph 9).

• (5) The condition in this sub-paragraph is that the relevant statements reflect—

• (a) a reversal of deferred tax liability in relation to the goodwill, or

• (b) the recognition or increase of a deferred tax asset in relation to it.

6A

• (1) Where the aggregate profit (loss) before income tax of the standard members of a multinational group in a territory reflects disqualified expense, the aggregate profit (loss) before income tax is to be adjusted to exclude it.

• (2) Disqualified expense means any expense or loss of a member of a multinational group reflected in the financial statements of the member arising as a result of qualifying arrangements that involve another member of the group—

• (a) to the extent that the expense or loss is a result of the member directly or indirectly being provided credit by the other member or the other member otherwise making an investment in the member under the arrangements and—

• (i) the credit or investment is not reflected as an increase in the revenue, or a gain, in the financial statements of the other member that corresponds to the expense or loss, or

• (ii) it is not reasonable to expect that the credit or investment will be reflected as an increase in the taxable income of the other member over the life of the arrangements that corresponds to the expense or loss, or

• (b) to the extent that—

• (i) the expense or loss is also included as an expense or loss in the financial statements of another member of the group, or

• (ii) the expense or loss is mirrored by an amount that can be deducted from the taxable income of another member of the group that is located in a different territory to the member.

• (3) But—

• (a) an expense or a loss is not disqualified expense as a result of sub-paragraph (2)(a) if it is solely referable to the provision of qualifying tier one capital,

• (b) an expense or loss is not disqualified expense as a result of sub-paragraph (2)(b)(i) to the extent it is offset against revenue that is included in the financial statements of each member whose financial statements reflect the expense or loss, and

• (c) an expense or loss is not disqualified expense as a result of sub-paragraph (2)(b)(ii) to the extent that it is offset against revenue or income that is included in both—

• (i) the financial statements that reflect the expense or loss, and

• (ii) the taxable income from which the amount that mirrors the expense or loss can be deducted.

• (4) An expense or loss included in the financial statements of a member of a multinational group is to be ignored to the extent that the expense or loss is included in the financial statements of another member of the group as a result of—

• (a) the other member having a direct or indirect ownership interest in the member, and

• (b) the member being regarded as tax transparent in the territory in which the other member is located.

• (5) Where as a result of sub-paragraph (2)(b)(i) more than one standard member in a territory has disqualified expense in respect of the same expense or loss, sub-paragraph (1) applies to all but one of those amounts of disqualified expense.

• (6) For the purposes of sub-paragraph (2)(a)(ii), ignore any increase in the taxable income of the other member—

• (a) that is offset by a devalued tax attribute, or

• (b) where—

• (i) the payment that gives rise to the expense or loss in question also results in a taxable deduction or loss of a further member of the group located in the same territory as the other member, and

• (ii) that deduction or loss is not reflected in the aggregate profit (loss) before income tax for that territory for the purposes of determining whether an election under paragraph 3 that applies in relation to that further member can be made.

• (7) For the purposes of sub-paragraph (6)(a), a “devalued tax attribute” means a tax attribute of a member of a multinational group—

• (a) whose value is reflected in financial statements of the member at less than the amount of the attribute multiplied by the tax rate that applies to the member, or

• (b) whose value would be so reflected if the qualifying arrangements that result in disqualified expense or disqualified tax expense (see paragraph 6B) were ignored.

• (8) For the purposes of this paragraph and paragraph 6B, arrangements are “qualifying” if—

• (a) they were entered into on or after 16 December 2022, or

• (b) they were entered into before that date, but—

• (i) the arrangements are amended on or after that date (including by way of a substitution of one or more of the parties),

• (ii) the performance of rights or obligations under the arrangements is altered on or after that date (for example where payments under the arrangements are reduced or ceased), or

• (iii) the accounting treatment of the arrangements is varied on or after that date.

• (9) In this paragraph and in paragraph 6B reference to the financial statements of a member of a multinational group is—

• (a) in relation to an accounting period in which an election under paragraph 3 that applies in relation to the member was made, or for the purposes of determining whether such an election can be made, to the financial statements, or financial accounts, that form the basis of qualified financial statements in relation to the member for the purposes of this Part of this Schedule, or

• (b) otherwise, to the underlying profits accounts of that member (see section 136).

6B

• (1) Where the aggregate qualifying income tax expense of the standard members of a multinational group in a territory reflects disqualified tax expense, the aggregate qualifying income tax expense is to be adjusted to exclude it.

• (2) Disqualified tax expense means any qualifying income tax expense of a member of a multinational group reflected in the financial statements of the member that, as a result of qualifying arrangements, is also reflected in—

• (a) the covered tax balance of one or more other members of the group, or

• (b) the qualifying income tax expense of one or more other members of the group.

• (3) But qualifying income tax expense is not to be regarded as disqualified tax expense—

• (a) if the income to which the tax expense relates is reflected in the financial statements of each member of the group falling within sub-paragraph (2)(a) and (b) to at least the same extent to which the tax expense is reflected in the covered tax balance, or qualifying income tax expense, of each of those members;

• (b) to the extent that the duplication of the tax expense would not arise if the adjustments that would have been made in determining the member’s covered tax balance (and that are not required to be made for the purpose of determining the member’s qualifying income tax expense) had been made.

Part 2A — UTPR transitional safe harbour election

12A

• (1) The filing member of a multinational group may elect for an accounting period that in the territory of the ultimate parent—

• (a) no member of the group located in the territory has an untaxed amount relating to that period, and

• (b) no joint venture group whose joint venture parent is located in the territory has an untaxed amount in relation to the multinational group relating to that period.

• (2) An election may only be made for an accounting period if—

• (a) the minimum corporate tax rate for the territory of the ultimate parent is equal to, or in excess of, 20%, and

• (b) the accounting period—

• (i) commenced on or before 31 December 2025 and ends before 31 December 2026, and

• (ii) is not longer than 12 months.

• (3) The “minimum corporate tax rate” for a territory means—

• (a) in the case of a territory in which corporate income tax may be imposed by subdivisions of that territory as well as by a national authority, the sum of—

• (i) the nominal national rate that generally applies, and

• (ii) the lowest nominal rate that generally applies that is imposed by a subdivision of that territory (and where one or more subdivisions do not impose corporate income tax, that rate will be zero), or

• (b) otherwise, the nominal rate that generally applies.

Part 2 — Untaxed amounts: international expansion of groups

7

• (1) This paragraph applies to a multinational group for an accounting period if—

• (a) it meets the international expansion condition for that period, and

• (b) the accounting period is the first accounting period in which the group came within the scope of Chapter 9A, or any of the following 4 accounting periods.

• (2) If this paragraph applies to a multinational group for an accounting period—

• (a) no member of the group has an untaxed amount relating to that period, and

• (b) no joint venture group has an untaxed amount in relation to the multinational group relating to that period.

• (3) A multinational group meets the international expansion condition for an accounting period if—

• (a) the group does not have members located in more than 6 territories, and

• (b) the sum of the values of tangible fixed assets of qualifying members of the group, other than members located in the reference territory, for that period does not exceed 50 million euros.

• (4) For the purposes of this paragraph—

• (a) the value of tangible fixed assets of a qualifying member of a multinational group is to be determined in accordance with section 229H, and

• (b) the “reference territory” is the territory for which the sum of the values of tangible fixed assets of qualifying members of the group located in that territory is greatest.

• (5) The first accounting period in which a multinational group comes within the scope of Chapter 9A is the later of—

• (a) the first accounting period for which it meets Condition A in section 129(2) (annual revenue exceeds 750 million euros), and

• (b) the first accounting period beginning on or after the day on which section 229C (allocation of untaxed amount to members) comes into force for any purpose.

Introduction

Meaning of “filing member”

Registration

Other administrative provisions

Amendments: penalties

Other amendments

Introduction

Meaning of “soft drink” and “package”

Meaning of “prepared drinks”

Sugar content condition

Exempt soft drinks

Levy rates

Tax credits

Commencement

FA 2003

CAA 2001

FA 2021

National Insurance Contributions Act 2022

Income tax and corporation tax

Annual tax on enveloped dwellings

Stamp duty land tax

Regulations