Finance (No. 2) Act 2023

• (4) Sub-paragraphs (4) to (9) of paragraph 34 and paragraph 36 apply to a partnership payment notice as they apply to a group payment notice.

• (5) In this paragraph and in paragraph 37B, reference to a partner, in the case of a limited partnership, is to a general partner.

37B

• (1) This paragraph applies where a partner of a member of a multinational group that is a partnership (the “payer”) makes a payment in respect of the liability to pay multinational top-up tax of the partnership (whether or not in consequence of a partnership payment notice).

• (2) The payer may recover the amount from the other partners.

• (3) In calculating the payer's income, profits or losses for tax purposes—

• (a) the payment is not allowed as a deduction, and

• (b) the reimbursement of any such payment is not to be regarded as a receipt.

• (4) The payment or its reimbursement—

• (a) is not (otherwise) to be taken into account in calculating the profits or losses of for corporation tax or income tax purposes of either the payer or the other partners, and

• (b) is not to be regarded as a distribution for income tax or corporation tax purposes.

• (5) The amount paid by the payer is to be taken into account in calculating—

• (a) the amount of multinational top-up tax unpaid by the partnership, and

• (b) the amount due by virtue of a partnership payment notice relating to the amount unpaid.

• (6) Similarly, any payment by the partnership or by any of the other partners of any of the amount unpaid is to be taken into account in calculating the amount due by virtue of a partnership payment notice (or by virtue of any other partnership payment notice relating to the amount unpaid).

• (7) In this paragraph, “for tax purposes” means for the purposes of income tax, corporation tax, multinational top-up tax or domestic top-up tax.

Long term elections

Annual elections

Intra-group transfers before entry into regime

Part 3 — Transitional reporting election

13

• (1) HMRC may publish a notice that provides for alternative requirements for the information that must be contained in an information return in respect of members of a multinational group to which an election under sub-paragraph (3) applies.

• (2) Where—

• (a) HMRC have published a notice under paragraph (1) containing alternative requirements, and

• (b) an election under sub-paragraph (3) applies to members of a multinational group for an accounting period,

paragraph 10 of Schedule 14 applies to the filing member of the group for that period subject to the notice.

• (3) An election under this sub-paragraph—

• (a) is to be made in respect of all of the members of a multinational group in a territory,

• (b) is to be made by the filing member of the group,

• (c) may only have effect in relation to an accounting period that begins on or before 31 December 2028 and ends before 1 July 2030, and

• (d) may only be made if condition A, B or C is met.

• (4) Condition A is that none of the members in the territory have top-up amounts or additional top-up amounts for the accounting period to which the election is to apply.

• (5) Condition B is that—

• (a) there is only one responsible member responsible for all of the members in the territory for the accounting period to which the election is to apply, and

• (b) the sum of amounts attributed under Chapter 7 of Part 3 to that responsible member for that period in respect of those members’ top-up amounts and additional top-up amounts is equal to the sum of the members’ top-up amount and additional top-up amounts.

• (6) Condition C is that—

• (a) there is more than one responsible member responsible for the members of the group in the territory for the accounting period to which the election is to apply, and

• (b) each responsible member is responsible for every member of the group in the territory and has the same inclusion ratio for each member it is responsible for.

• (7) Paragraph 2 of Schedule 15 (annual elections) applies to an election under this paragraph.

Schedule 16A

Part 1 — Qualifying domestic top-up tax safe harbour

Chapter 1 — Qualifying domestic top-up tax safe harbour election

1

• (1) The filing member of a multinational group may make a qualifying domestic top-up tax safe harbour election for an accounting period in respect of a territory.

• (2) The effect of the election is that all of the standard members of the group located in the territory are to be treated as not having top-up amounts or additional top-up amounts for the purpose of determining the liability of any member of the group to multinational top-up tax.

• (3) An election is only valid for an accounting period if—

• (a) a qualifying domestic top-up tax applies in that territory for that period,

• (b) that tax is accredited for the purposes of the election (see paragraph 2), ...

• (ba) the accreditation applies to the accounting period, and

• (c) none of the disqualifying conditions in paragraph 3 apply for that period.

• (4) Paragraph 2 of Schedule 15 (annual elections) applies to an election under this paragraph.

2

• (1) A qualifying domestic top-up tax is accredited for the purposes of an election under paragraph 1 if that tax is specified as such in , or in accordance with, regulations made by the Treasury.

• (1A) Regulations may provide for the accreditation of a tax by specification in a notice published by the Commissioners for His Majesty’s Revenue and Customs in accordance with the regulations.

• (1B) Regulations, or a notice, must identify the accounting periods to which the accreditation applies.

• (1C) Regulations under this paragraph may provide for the accreditation of a tax to have effect from a time before the tax was specified (but may not provide for the accreditation of a tax to cease to have effect in relation to accounting periods commencing before the regulations are made).

• (2) A qualifying domestic top-up tax is to be treated as accredited for the purposes of any accounting period that concluded before the first regulations under this paragraph have been made if—

• (a) the tax falls within Chapter 5.5 to 5.7 of the QDMTT safe harbour guidance, or

• (b) it is reasonable to conclude that the tax is likely to fall within Chapter 5.5 to 5.7 of that guidance.

• (3) For the purposes of sub-paragraph (2) the “QDMTT safe harbour guidance” means Chapter 5 of Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), July 2023, published by the OECD on 17 July 2023.

3

• (1) Conditions A to D are disqualifying conditions for the purposes of paragraph 1(3)(c) in relation to a multinational group and a territory.

• (2) Condition A is that—

• (a) the ultimate parent is located in the territory,

• (b) the ultimate parent is a flow-through entity, and

• (c) the qualifying domestic top-up tax applying in the territory—

• (i) does not generally impose a charge on the ultimate parent as a result of it being a flow-through entity, and

• (ii) does not include provision for a charge to be imposed on the ultimate parent in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.

• (3) Condition B is that—

• (a) a responsible member of the group is located in the territory,

• (b) the member is not the ultimate parent of the group,

• (c) the member is a flow-through entity, and

• (d) the qualifying domestic top-up tax applying in the territory—

• (i) does not generally impose a charge on the member as a result of it being a flow-through entity, and

• (ii) does not include provision for a charge to be imposed on the member in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.

• (4) Condition C is that—

• (a) the qualifying domestic top-up tax applying in the territory provides that it does not apply to a multinational group in the initial phase of the group’s international expansion,

• (b) that provision is not limited in application to circumstances where the members of a multinational group in the territory are not subject to Pillar Two rules, and

• (c) that provision applies to the group.

• (5) Condition D is that the enforceability of an amount of qualifying domestic top-up tax accruing to a standard member of the group is in question.

• (6) Subsections (3), (4) and (6) of section 256A (qualifying domestic top-up tax treated as not accruing where contested) apply for the purpose of determining whether the enforceability of an amount of qualifying domestic top-up tax is in question.

Chapter 2 — Application to non-standard members of a multinational group

4

• (1) For the purpose of applying Chapter 1 of this Part of this Schedule to a joint venture group (see section 227 which applies this Schedule generally, with modifications, to joint venture groups), that Chapter has effect as if in paragraph 3—

• (a) in sub-paragraph (1), for “Conditions A to D” there were substituted “Conditions A to E”,

• (b) after sub-paragraph (6), there were inserted—

(7) Condition E is that the qualifying domestic top-up tax applying in the territory— (a) does not generally impose a charge on ... members of a joint venture group, and (b) does not include provision for a charge to be imposed on such members in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.

• (2) For that purpose ignore section 227(1)(a) (reference to ultimate parent treated as reference to joint venture parent).

• (3) Accordingly, the filing member of a multinational group may make a separate qualifying domestic top-up tax safe harbour election in respect of joint venture members of a joint venture group in a territory.

5

• (1) Chapter 1 of this Part of this Schedule to applies to investment entities and has effect for that purpose as if—

• (a) references to standard members of a multinational group were to members of the group that are investment entities, and

• (b) in paragraph 3—

• (i) in sub-paragraph (1), for “Conditions A to D” there were substituted “Conditions A to E”,

• (ii) after sub-paragraph (6), there were inserted—

(7) Condition E is that the qualifying domestic top-up tax applying in the territory— (a) does not generally impose a charge on members of the group that are investment entities, and (b) does not include provision for a charge to be imposed on such members in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.

• (2) Accordingly, the filing member of a multinational group may make a separate qualifying domestic top-up tax safe harbour election in respect of members of the group that are investment entities.

6

• (1) Chapter 1 of this Part of this Schedule to applies to minority owned members of a multinational group and has effect for that purpose as if references to standard members of a multinational group were to members of the group that are minority owned members.

• (2) Accordingly, the filing member of a multinational group may make a separate qualifying domestic top-up tax safe harbour election in respect of minority owned members of the group.

Introduction

Meaning of “filing member”

Registration

Other administrative provisions

Amendments: penalties

Other amendments

Notification etc

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

137A

• (1) Where any provision of this Part requires the substitution of a value recorded in the underlying profits accounts of a member of a multinational group for an accounting period, the substituted value—

• (a) is to be used for all purposes of this Part instead of the value recorded in the accounts (for example, where the carrying value of an asset has been substituted and the value of that asset is relevant to the member’s deferred tax expense, that substituted value is to be used in connection with determining that expense), and

• (b) is to be updated (for example, in making adjustments for depreciation for subsequent accounting periods),

in each case, in accordance with the accounting standard used in determining the underlying profits of the member.

• (2) But where the value in question is the value of an asset, no adjustments for impairment are to be made to it.

• (3) Where the impaired value of an asset recorded in the underlying profits accounts for any accounting period is less than the substituted value of the asset for that period, use the value from the underlying profits accounts instead for that period and all subsequent periods (and subsection (2) does not apply in relation to that value).

176G

• (1) This section applies to an investor in a tax equity partnership arrangement if—

• (a) qualifying flow-through tax benefits are excluded under section 176D(1) from the investor’s covered tax balance for an accounting period, and

• (b) the investor has an excess return from the arrangement in a later accounting period (“the later period”).

• (2) For the purpose of determining the investor’s covered tax balance for the later period, the investor’s qualifying current tax expense for that period is to be adjusted (after the steps in section 174(1) have been taken) by subtracting the clawback amount.

• (3) “The clawback amount” is determined as follows—

• Step 1Determine the total amount of the qualifying flow-through tax benefits provided to the investor under the arrangement in accounting periods before the later period.

• Step 2Subtract from the result of Step 1 the total of any amounts subtracted under subsection (2) from the investor’s qualifying current tax expense for accounting periods before the later period.

• Step 3Compare the result of Step 2 with the amount of the investor’s excess return from the arrangement in the later period.Whichever is less is the clawback amount.

• (4) For the purposes of this section, an investor has an “excess return” from an arrangement in an accounting period—

• (a) where section 176E applies, if the result of Step 6 in section 176E(1) exceeds the amount of the flow-through tax benefits provided under the arrangement in the accounting period, in which case the amount of the excess return is the amount of the excess;

• (b) where section 176F applies and the investor did not have an excess return from the arrangement in an earlier accounting period, if the result of Step 2 in that section is less than nil, in which case the amount of the excess return is the amount by which it is less than nil;

• (c) where section 176F applies and the investor had an excess return from the arrangement in an earlier accounting period, if the result of Step 2 in that section is less than it was in the last accounting period in which the investor had an excess return from the arrangement, in which case the amount of the excess return is the amount of the difference.

180A

• (1) Where the filing member of the multinational group mentioned in section 180(8)(a) has made a transitional safe harbour election under paragraph 3 of Schedule 16 for the relevant period in respect of the territory mentioned in section 180(8)(a), for the purposes of that section the effective tax rate of the members of the group in respect of which the election applies is to be taken to be the simplified effective tax rate of the standard members of the multinational group (as defined in paragraph 8 of Schedule 16)).

• (2) Where the filing member of the multinational group mentioned in section 180(8)(a) has made a transitional safe harbour election under paragraph 10 of Schedule 16 (application in the case of joint venture group) for the relevant period in respect of the territory mentioned in section 180(8)(a), for the purposes of that section the effective tax rate of the members of the group in respect of which the election applies is to be taken to be the simplified effective tax rate of the standard members of that multinational group (as defined in paragraph 8 of Schedule 16).

• (3) Subsection (4) has effect where the filing member of a particular multinational group mentioned in section 180(8)(a) has made one or more separate elections under any of paragraphs 1, 4, 5 and 6 of Schedule 16A for the relevant period in respect of the territory mentioned in section 180(8)(a).

• (4) For the purposes of section 180, the effective tax rate of any member or set of members to which a particular election mentioned in subsection (4) relates is to be the rate (expressed as a percentage) given by dividing—

• (a) the aggregate tax expense of that member or set of members used to determine the effective tax rate for the purposes of the qualifying domestic top-up tax applying in the territory for the accounting period, together with any amounts of qualifying domestic top-up tax paid of that member or set of members, by

• (b) the income of that member or set of members determined for the purposes of the qualifying domestic top-up tax.

• (5) In this section “relevant period” is to be interpreted in accordance with section 180(2)(a).

181A

• (1) Qualifying current tax expense is to be allocated between standard members of a multinational group in a territory in which a cross-crediting regime applies and standard members of the group in another territory in accordance with the cross-crediting regime methodology.

• (2) A cross-crediting regime applies in a territory if, under the law of that territory, taxes paid with respect to one source of income arising in another territory give rise to foreign tax credits which can be used against another source of income arising in a further territory.

• (3) The “cross-crediting regime methodology” means—

• (a) provisions of regulations made under section 262(1)(a) (power to make further provision about the application of provisions of this Part etc) identified in the regulations as the cross-crediting regime methodology, or

• (b) where no cross-crediting regime methodology is identified in any such regulations, the methodology described in the cross-crediting guidance.

• (4) The “cross-crediting guidance” means Chapter 3.1 of Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), June 2024 published by the OECD on 17 June 2024.

• (5) Where subsection (3)(b) applies, the cross-crediting guidance has effect as cross-crediting regime methodology with all necessary modifications for that purpose (for example, reference to a Five-Year Election is to be read as an election to which paragraph 1 of Schedule 15 (long term elections) applies).

• (6) This Chapter is to have effect with such modifications as are necessary to give effect to the cross-crediting regime methodology.

Cross-border allocation of deferred tax expense

181B

• (1) Deferred tax assets and liabilities are to be allocated between standard members of a multinational group in one territory and standard members of the group in another territory in accordance with the deferred taxes methodology.

• (2) The “deferred taxes methodology” means—

• (a) provisions of regulations made under section 262(1)(a) (power to make further provision about the application of provisions of this Part etc) identified in the regulations as the deferred taxes methodology, or

• (b) where no deferred taxes methodology is identified in any such regulations, the methodology described in the cross-border deferred taxes guidance.

• (3) The “cross-border deferred taxes guidance” means Chapter 4.2 of Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), June 2024 published by the OECD on 17 June 2024.

• (4) Where subsection (2)(b) applies, the cross-border deferred taxes guidance has effect as deferred taxes methodology with all necessary modifications for that purpose (for example, reference to a Five-Year Election is to be read as an election to which paragraph 1 of Schedule 15 (long term elections) applies).

• (5) This Chapter is to have effect with such modifications as are necessary to give effect to the deferred taxes methodology.

198ZA

• (1) A member of a multinational group that is a flow-through entity has a flow-through payroll amount for a territory for an accounting period if the member has costs that would be eligible payroll costs if the member were located in that territory and were not a flow-through entity and—

• (a) there is at least one other member of the group—

• (i) that is not a flow-through entity,

• (ii) that is located in that territory, and

• (iii) to whom a proportion of the underlying profits of the flow-through entity for the accounting period are allocated under section 168 (underlying profits of transparent entities) or, where the underlying profits of the entity are nil or less, would be so allocated if the flow-through entity had underlying profits of 100 euros, or

• (b) the entity—

• (i) is a flow-through entity to some extent for that period as a result of section 169 (certain non tax resident entities to be treated as flow-through entities),

• (ii) is not a flow-through entity to some extent for that period, and

• (iii) was created in that territory.

• (2) Section 196 applies for the purposes of determining a flow-through payroll amount of a flow-through entity for a territory as it applies for the purposes of determining eligible payroll costs but as if—

• (a) any reference in that section to the territory of the member were to the territory to which the flow-through payroll amount relates, and

• (b) subsection (7) of that section were omitted.

• (3) Where a member of a multinational group that is a flow-through entity has a flow-through payroll amount for a territory for an accounting period, the eligible payroll costs of each member of the group falling within subsection (1)(a) for that period (which may be nil) are to be increased by the amount given by multiplying the flow-through payroll amount by the relevant proportion in relation to that member for that period.

• (4) The relevant proportion in relation to a member for an accounting period is the proportion of the underlying profits of the flow-through entity for that period—

• (a) in a case where the flow-through entity has underlying profits that exceed nil for that period, that is allocated to that member under section 168, or

• (b) in a case where the underlying profits of the flow-through entity for that period are nil or less, that would be allocated to that member if the flow-through entity had underlying profits of 100 euros.

• (5) Where a flow-through entity—

• (a) is a flow-through entity to some extent for an accounting period as a result of section 169,

• (b) is not a flow-through entity to some extent for that period, and

• (c) was created in a territory for which it has a flow-through payroll amount for that period,

the eligible payroll costs of that entity for that period (which may be nil) are to be increased by the amount given by multiplying that flow-through payroll amount by the relevant proportion in relation to that entity for that period.

• (6) The relevant proportion in relation to that entity for an accounting period is the proportion of the underlying profits of the entity for that period—

• (a) in a case where the entity has underlying profits that exceed nil for that period, that are not allocated to any other entity under section 168, or

• (b) in a case where the underlying profits of the entity for that period are nil or less, that would not be allocated to any other entity under that section if the entity had profits of 100 euros.

• (7) For the purposes of applying this section in relation to a multinational group whose ultimate parent is a flow-through entity, the ultimate parent is to be treated as not being a flow-through entity.

198ZB

• (1) A member of a multinational group that is a flow-through entity that is not the ultimate parent has a flow-through tangible asset amount for a territory for an accounting period if the member holds one or more assets in that territory and—

• (a) there is at least one other member of the group—

• (i) that is not a flow-through entity,

• (ii) that is located in that territory, and

• (iii) to whom a proportion of the underlying profits of the flow-through entity for the accounting period are allocated under section 168 (underlying profits of transparent entities) or, where the underlying profits of the entity are nil or less, would be so allocated if the flow-through entity had underlying profits of 100 euros, or

• (b) the entity—

• (i) is a flow-through entity to some extent for that period as a result of section 169 (certain non tax resident entities to be treated as flow-through entities),

• (ii) is not a flow-through entity to some extent for that period, and

• (iii) was created in that territory.

• (2) Sections 197 and 197A apply for the purposes of determining a flow-through tangible asset amount of a flow-through entity for a territory as they apply for the purposes of determining an eligible tangible asset amount but as if—

• (a) any reference in those sections to the territory of the member were to the territory to which the flow-through tangible asset amount relates, and

• (b) subsection (10) of section 197 were omitted.

• (3) Where a member of a multinational group that is a flow-through entity has a flow-through tangible asset amount for a territory for an accounting period, the eligible tangible asset amount of each member of the group falling within subsection (1)(a) for that period (which may be nil) is to be increased by the amount given by multiplying the flow-through tangible asset amount by the relevant proportion in relation to that member for that period.

• (4) The relevant proportion in relation to a member for an accounting period is the proportion of the underlying profits of the flow-through entity for that period—

• (a) in a case where the flow-through entity has underlying profits that exceed nil for that period, that is allocated to that member under section 168, or

• (b) in a case where the underlying profits of the flow-through entity for that period are nil or less, that would be allocated to that member if the flow-through entity had underlying profits of 100 euros.

• (5) Where a flow-through entity—

• (a) is a flow-through entity to some extent for an accounting period as a result of section 169,

• (b) is not a flow-through entity to some extent for that period, and

• (c) was created in a territory for which it has a flow-through tangible asset amount for that period,

the eligible tangible asset amount of that entity for that period (which may be nil) is to be increased by the amount given by multiplying that flow-through tangible asset amount by the relevant proportion in relation to that entity for that period.

• (6) The relevant proportion in relation to that entity for an accounting period is the proportion of the underlying profits of the entity for that period—

• (a) in a case where the entity has underlying profits that exceed nil for that period, that are not allocated to any other entity under section 168, or

• (b) in a case where the underlying profits of the entity for that period are nil or less, that would not be allocated to any other entity under that section if the entity had profits of 100 euros.

• (7) For the purposes of applying this section in relation to a multinational group whose ultimate parent is a flow-through entity, the ultimate parent is to be treated as not being a flow-through entity.

198ZC

• (1) In determining for an accounting period the eligible payroll costs or eligible tangible asset amount of a flow-through entity that is the ultimate parent of a multinational group, the amount given by section 196 or 197 is to be reduced by the section 170 proportion.

• (2) In subsection (1), “the section 170 proportion” means the proportion of the adjusted profits of the flow-through entity for the accounting period that—

• (a) in a case where subsection (1) of 170 (adjustments for ultimate parent that is a flow-through entity) applies, is excluded under that subsection, or

• (b) in a case where that subsection does not apply as a result of the entity having not made a profit for that period, would be excluded under that subsection if the entity had adjusted profits of 100 euros.

• (3) In subsection (2), “the adjusted profits” means the adjusted profits before the application of section 170.

Chapter 9A — Untaxed amounts

Introduction

229A

• (1) The top-up amount and additional top-up amounts of a member (“M”) of a multinational group for an accounting period are “potentially undertaxed” if—

• (a) M is the ultimate parent or is located in the same territory as the ultimate parent, or

• (b) the ultimate parent is not a responsible member.

• (2) Subsection (1) does not apply if—

• (a) the ultimate parent is not a responsible member,

• (b) none of the ownership interests of the ultimate parent in M are direct ownership interests, and

• (c) every indirect ownership interest the ultimate parent has in M is derived from an ownership interest the ultimate parent has in a responsible member.

• (3) Subsection (1) also does not apply if—

• (a) the ultimate parent is located in a territory in which a DIIR is in force and is a responsible member, and

• (b) M is located in the same territory as the ultimate parent.

• (4) This section and section 229B do not apply to members of a joint venture group (but see section 229I for alternative provision).

229B

• (1) A member of a multinational group has an untaxed amount if conditions A and B are met.

• (2) Condition A is that the top-up amount and additional top-up amounts of the member are potentially undertaxed.

• (3) Condition B is that the sum of amounts attributed under Chapter 7 to responsible members in respect of the member’s top-up amount and additional top-up amounts is less than the sum of the member’s top-up amount and additional top-up amounts.

• (4) The untaxed amount is the amount given by subtracting—

• (a) the sum of amounts attributed under Chapter 7 to responsible members in respect of the member’s top-up amount and additional top-up amounts, from

• (b) the sum of the member’s top-up amount and additional top-up amounts.

Allocation of untaxed amounts

229C

• (1) An untaxed amount of a member of a multinational group is to be allocated to qualifying members of the group located in the United Kingdom by—

• (a) first, determining the amount (“the UK proportion”) of the untaxed amount to be allocated to the group in the United Kingdom in accordance with section 229D, and

• (b) then, allocating an amount of the UK proportion to each qualifying member located in the United Kingdom in accordance with section 229E.

• (2) But no allocation is to be made under subsection (1) if in section 229D(1) the results of both Step 2 and Step 5 are nil.

• (3) For the purposes of this Chapter, a member of a multinational group is qualifying unless it is—

• (a) an investment entity, or

• (b) a member of a joint venture group.

229D

• (1) Take the following steps to determine the UK proportion of an untaxed amount of a member of a multinational group—

• Step 1Determine the number of employees of qualifying members of the group located in the United Kingdom for the accounting period to which the untaxed amount relates (“the relevant period”).

• Step 2Determine the total number of employees in the relevant period of qualifying members of the group located in territories (including the United Kingdom) in which a qualifying undertaxed profits tax applies to the untaxed amount.

• Step 3Divide the result of Step 1 by the result of Step 2.

• Step 4Determine the value of tangible fixed assets of the qualifying members of the group located in the United Kingdom for the relevant period.

• Step 5Determine the value of tangible fixed assets of the qualifying members of the group located in territories (including the United Kingdom) in which a qualifying undertaxed profits tax applies to the untaxed amount.

• Step 6Divide the result of Step 4 by the result of Step 5.

• Step 7Add together the results of Step 3 and Step 6 and divide that sum by 2.

• Step 8The UK proportion of the untaxed amount is—if the nil asset value condition is met, the untaxed amount multiplied by the result of Step 3;if the nil employee condition is met, the untaxed amount multiplied by the result of Step 6;in any other case, the untaxed amount multiplied by the result of Step 7.

• (2) For the purposes of subsection (1)—

• (a) the “nil asset value condition” is met if—

• (i) the result of Step 5 is nil, but

• (ii) the result of Step 2 is not nil;

• (b) the “nil employee condition” is met if—

• (i) the result of Step 2 is nil, but

• (ii) the result of Step 5 is not nil.

• (3) A qualifying undertaxed profits tax applies in a territory in relation to an untaxed amount if—

• (a) a qualifying undertaxed profits tax is in force in that territory for the relevant period, and

• (b) the provisions of that tax result in a proportion of the untaxed amount (however described for the purposes of that tax) that is greater than nil being allocated to the territory.

• (4) See sections 229G and 229H for how to determine the number of employees and the value of tangible fixed assets of a qualifying member of a multinational group.

229E

• (1) Take the following steps to determine how much of an untaxed amount is to be allocated to each qualifying member located in the United Kingdom—

• Step 1Determine the number of employees of the member in the accounting period (“the relevant period”) to which the untaxed amount relates.

• Step 2Determine the total number of employees for the relevant period of qualifying members of the group located in the United Kingdom.

• Step 3Divide the result of Step 1 by the result of Step 2.

• Step 4Determine the value of tangible fixed assets of the member for the relevant period.

• Step 5Determine the value of tangible fixed assets for the relevant period of the qualifying members of the group located in the United Kingdom.

• Step 6Divide the result of Step 4 by the result of Step 5.

• Step 7Add together the results of Step 3 and Step 6 and divide that sum by 2.

• Step 8The untaxed amount to be allocated to the member is—if the nil asset value condition is met, the UK proportion multiplied by the result of Step 3;if the nil employee condition is met, the UK proportion multiplied by the result of Step 6;in any other case, the UK proportion multiplied by the result of Step 7.

• (2) For the purposes of subsection (1)—

• (a) the “nil asset value condition” is met if—

• (i) the result of Step 5 is nil, but

• (ii) the result of Step 2 is not nil;

• (b) the “nil employee condition” is met if—

• (i) the result of Step 2 is nil, but

• (ii) the result of Step 5 is not nil.

• (3) This section is subject to section 229F.

229F

• (1) The filing member of the group may elect for an accounting period that—

• (a) section 229E does not apply, and

• (b) instead, a member of the group specified in the election is to be allocated the whole of the UK proportion of each untaxed amount that would be otherwise be allocated between the qualifying members of the group located in the United Kingdom.

• (2) A member of the group may only be specified in the election if—

• (a) the member is located in the United Kingdom, and

• (b) the member has consented to the election.

• (3) Paragraph 2 of Schedule 15 (annual elections) applies to an election under this section, and has effect for that purpose as if references to an information return or overseas return notification were to a self-assessment return or below-threshold notification.

How to determine number of employees and tangible fixed assets values

Number of employees

229G

• (1) For the purposes of this Chapter, the number of employees of a qualifying member of a multinational group in an accounting period is the full-time equivalent employee number for that member for that period.

• (2) To determine the full-time equivalent employee number for a member of a multinational group for an accounting period take the following steps—

• Step 1Determine the number of full-time employees of that member that were full-time employees for the whole of that period.

• Step 2Determine, for each employee of that member for that period who is not a full-time employee for the whole of that period (whether they were part-time employees or were not employed for the whole of the period), such fraction as is just and reasonable.

• Step 3Add together the number determined under Step 1 and the fractions determined under Step 2.If the member was a member of the group throughout the whole of the period, the result of this Step is the full-time equivalent employee number.

• Step 4Where the member was not a member of the group for the whole period, make such adjustments to the result of Step 3 as is just and reasonable to arrive at a full-time equivalent employee number that reflects the number of employees of the member in the period for which it was a member of the group.For the purpose of this Step, ignore section 208(2) (members joining or leaving group in an accounting period treated as members for the whole of the period).

• (3) For the purposes of this section “employee”, in relation to a member of a multinational group, means a person whose employment costs are met by that member (whether or not the person’s activities are carried on in the territory of the member) as recorded in appropriate financial statements of the member and who—

• (a) is regarded as an employee under the law of the territory in which the member is located, or

• (b) participates in the ordinary operating activities of the member of the group (including on a part-time basis).

• (4) For the purposes of subsection (3) financial statements are “appropriate” only if the basis on which they are prepared is consistent for all members of the group (wherever located).

• (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