Finance (No. 2) Act 2023

(132) The effective tax rate of a qualifying entity that is not a member of a group is determined as follows— - Step 1Determine, in accordance with Chapter 4 of Part 3, the adjusted profits for that period of that member. - Step 2If, on determining those adjusted profits, the member has not made a profit, the effective tax rate is to be treated as 15%. Otherwise, proceed to Step 3. - Step 3Determine the covered tax balance of the member for the period (which may be negative) in accordance with Chapter 5 of Part 3. - Step 4If that balance is nil the effective tax rate is 0%. Otherwise, proceed to Step 5. - Step 5Divide the covered tax balance by the adjusted profits. - Step 6Except where Step 2 or 4 applies, the effective tax rate of the entity is X%, where X (which will be negative if the covered tax balance is negative) is the result of Step 5 multiplied by 100.

• (3) That Part has effect for domestic entity purposes as if—

• (a) references to “member of a multinational group” (however framed and including references to multiple members) were to “qualifying entity”;

• (b) any reference (however framed) to the consolidated financial statements of the ultimate parent were to the qualifying financial statements of the entity;

• (ba) in section 182(2)(e), after “credits”, in the first place it occurs, there were inserted “other than qualifying refundable tax credits”;

• (c) in section 194 (total top-up amount), subsections (2) to (7) were omitted;

• (d) in section 203 (additional top-up amounts: covered taxes less than expected), subsections (3) to (7) were omitted;

• (e) in section 206 (additional top-up amounts: recalculations), subsections (4) to (8) were omitted.

• (4) Part 3 has effect for those purposes as if the following provisions (which are only relevant to groups or have no relevance for domestic entity purposes) were omitted—

• (a) in section 134 (underlying profits as determined for statements of ultimate parent), subsections (2) to (9);

• (b) section 135 (permanent establishments);

• (c) section 139 (consolidation adjustments);

• (d) section 140 (purchase accounting adjustments);

• (e) in section 141 (general exclusion of dividends), subsection (3)(c);

• (f) section 149 (arm’s length requirement);

• (g) section 150 (transactions between group members);

• (h) section 154 (exclusion of qualifying intra-group financing arrangement expenses);

• (i) sections 159 and 160 (adjustments applicable to permanent establishments);

• (j) in section 163 (election to spread capital gains), subsection (3);

• (k) section 164 (election to exclude intra-group transactions);

• (l) section 167 (underlying profits of member of group seen as transparent);

• (m) in section 168 (underlying profits of flow-through entities), subsection (8);

• (n) section 169 (non-tax resident entities to be treated as flow-through entities);

• (o) section 170 (adjustments for ultimate parent that is flow-through entity);

• (p) section 172 (ultimate parent subject to deductible dividend regime);

• (pa) in section 173 (covered taxes), subsection (1)(b);

• (q) section 177 (allocation of covered taxes: permanent establishments);

• (r) section 178 (reallocation of tax expense);

• (s) sections 179 and 180 (controlled foreign company tax regimes);

• (t) section 181 (distributions from other group members);

• (u) section 183 (qualifying foreign tax credits);

• (v) sections 189 to 192 (deemed distribution tax election);

• (w) sections 208 to 212 (restructuring of groups);

• (x) sections 213 to 215 (elections in relation to investment entities);

• (y) in section 216 (election where assets and liabilities adjusted to fair value), subsection (6);

• (z) sections 226 to 229 (joint venture groups, minority owned members and multi-parent groups).

• (z1) Chapter 9A (qualifying undertaxed profits tax).

Application of section 262

274

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Application of Schedule 14

275

Schedule 18—

• (a) applies Schedule 14 for the purpose of the administration of domestic top-up tax;

• (b) makes related amendments.

Application of transitional provision

276

The transitional provision in Schedule 16 applies in relation to domestic top-up tax as it applies in relation to multinational top-up tax as if—

• (a) references in that Schedule to a multinational group were to a group;

• (aa) where a qualifying member is a member of a group, for paragraph 3(2)(c) there were substituted—

(c) the election has been made in respect of the territory for each preceding accounting period that commenced on or after 31 December 2023— (i) in which the Pillar Two rules would, ignoring any transitional safe harbour election, have applied to any member of the group in the territory, and (ii) in which any member of the group is a qualifying entity for the purposes of domestic top-up tax,

,

• (b) where a qualifying entity is a member of a group and all members of the group are located in the United Kingdom, the following provisions of that Schedule (which have no relevance in such a case) were omitted—

• (i) paragraph 3(2)(b) and (d), and 3(7) to (9) (country-by-country reporting);

• (ii) the words “that are used for preparation of the group’s country-by-country report” in paragraph 4(2);

• (iii) paragraph 4(5) (use of statements used for preparation of country-by-country report);

• (iv) in paragraph 9(2), the words from “ignoring” to the end.

• (c) where a qualifying entity is not a member of a group—

• (i) references in that Schedule to a member of a group (however framed and including references to multiple members) were to a qualifying entity;

• (ii) references in that Schedule (however framed) to the consolidated financial statements of the ultimate parent were to the qualifying financial statements of the entity;

• (iii) paragraph 2 were omitted;

• (iiia) for paragraph 3(2)(c) there were substituted—

(c) the election has been made in respect of the territory for each preceding accounting period that commenced on or after 31 December 2023 in which the member was a qualifying entity for the purposes of domestic top-up tax,

,

• (iv) the provisions mentioned in paragraph (b)(i) to (iv) were omitted.

Index of defined expressions

277

See the table in Schedule 17 for a list of terms defined for Part 3, but which also contains some terms defined for this Part, and the provisions that define or explain them.

Domestic top-up tax to apply from 31 December 2023

278

This Part has effect in relation to accounting periods commencing on or after 31 December 2023.

Part 5 — Electricity generator levy

Introduction and charge

Charge on exceptional generation receipts

279

• (1) If a qualifying generating undertaking has exceptional generation receipts for a qualifying period, that undertaking is liable to pay a charge equal to 45% of those exceptional receipts.

• (2) The charge is referred to in this Part as the “electricity generator levy”.

• (3) A generating undertaking is “qualifying” in a qualifying period if generation attributed to it under this Part (see section 282, but also sections 294 to 297) for that period exceeds the levy threshold.

• (4) The levy threshold for a qualifying period is—

• (a) where the period is a year, 50,000 megawatt hours, or

• (b) where the period is shorter than a year, that number of megawatt hours multiplied by the amount given by dividing the number of days in the period by 365.

• (5) To determine if a generating undertaking has exceptional generation receipts for a qualifying period and (if so) the amount of those receipts, take the following steps—

• Step 1 (attribute generation receipts) Determine the amount of generation receipts to be attributed to the undertaking for the period in accordance with section 283.

• Step 2 (determine the maximum amount of receipts that would not be exceptional) Multiply the amount of electricity generation (expressed in megawatt hours) attributed to the undertaking for the period (see section 282) by the benchmark amount (see section 281).

• Step 3 (determine whether undertaking has receipts that exceed that amount) Subtract the result of Step 2 from the amount determined under Step 1. If the result of this Step is nil or less, the undertaking does not have any exceptional generation receipts (otherwise, carry on to Step 4).

• Step 4 (subtract allowable costs) Determine the amount of allowable costs (if any) to be attributed to the undertaking for the period (see section 284) and subtract that amount from the result of Step 3. If the result of this Step is nil or less, the undertaking does not have any exceptional generation receipts (otherwise, carry on to Step 5).

• Step 5 (apply revenue allowance) Subtract the revenue allowance for the period from the result of Step 4.

• Step 6 (result of Step 5 is amount of exceptional generation receipts unless negative) If the result of Step 5 is nil or less, the undertaking does not have any exceptional generation receipts. Otherwise, the amount of exceptional generation receipts the undertaking has for the period is the result of Step 5.

• (6) For the purposes of Step 5, the revenue allowance for a generating undertaking for a qualifying period is—

• (a) where the period is a year, £10 million, or

• (b) where the period is shorter than a year, £10 million multiplied by the amount given by dividing the number of days in the period by 365.

• (7) Other provisions in this Part may affect the determination of exceptional generation receipts, including—

• (a) section 293, which contains provision attributing amounts from a joint venture to its participants,

• (b) sections 294 and 295, which contain provision that attributes generation to participants in a joint venture in certain circumstances,

• (c) sections 296 and 297, which contain provision that attributes generation to significant minority shareholders in a generating undertaking in certain circumstances, and

• (d) section 308, which contains anti-avoidance provision.

Key concepts (generating undertaking etc)

280

• (1) In this Part—

• “company” has the meaning it has in the Corporation Tax Acts (see section 1121 of CTA 2010);

• “generating undertaking” means—a company, other than a company that is a member of a group, that operates a relevant generating station, ora group of companies that includes at least one member who operates a relevant generating station;

• a generating station is “relevant”—if it generates electricity at a relevant place and is not a generating station that mainly generates electricity—as a result of the burning of oil, coal or natural gas, oras a result of the use of plant driven by water, where the power is mainly a result of the hydrostatic head of the water having been increased by pumping, ...to the extent that it is not subject to—a contract for difference within the meaning of Chapter 2 of Part 2 of the Energy Act 2013 (contracts for difference),an investment contract within the meaning of Schedule 2 to that Act (investment contracts),a revenue collection contract within the meaning of Part 2 of the Nuclear Energy (Financing) Act 2022 (revenue collection contracts), orfeed-in tariff export payments , and to the extent it is not comprised of qualifying new generating plant (see section 311A);

• “relevant place” means a place in—the United Kingdom,the territorial sea of the United Kingdom, ora Renewable Energy Zone within the meaning of Part 2 of the Energy Act 2004 (see section 84(4) of that Act);

• a generating station is “subject”—to a contract for difference or an investment contract to the extent that its output may give rise to payments under such an instrument, andto feed-in tariff export payments to the extent its output gives rise to such payments, andto a revenue collection contract if the station is the subject of such a contract.

• (2) References in this Part to a “qualifying period” in relation to a generating undertaking means—

• (a) the period, if any, between the beginning of 1 January 2023 and the commencement of the first accounting period of the undertaking that commences on or after 1 January 2023,

• (b) the first accounting period of the undertaking commencing on or after 1 January 2023,

• (c) every subsequent accounting period of the undertaking that ends on or before 31 March 2028, and

• (d) the period, if any, between the end of the last accounting period ending on or before 31 March 2028 and the end of 31 March 2028.

• (3) References in this Part to an “accounting period” are—

• (a) in relation to a company within the charge to corporation tax, to an accounting period for the purposes of that tax, or

• (b) in relation to a company not within the charge to corporation tax, to a period that would be an accounting period for the purposes of that tax were the company within the charge to that tax and had first come within it on 1 January 2023.

See also section 288, which provides that the accounting period of a generating undertaking that is a group is the accounting period of its lead member.

Benchmark amount

281

• (1) The benchmark amount for the financial years ending in 2023 and 2024 is £75.

• (2) The benchmark amount for each subsequent financial year is the benchmark amount for the previous financial year—

• (a) increased or decreased by the same percentage as the consumer prices index for the December before the start of that subsequent financial year has increased or decreased from that index for the previous December, and

• (b) rounded up to the nearest whole penny.

• (3) Before the commencement of each of the financial years ending in 2025 to 2028, His Majesty’s Revenue and Customs (referred to elsewhere in this Part as “HMRC”) must publish the benchmark amount for that financial year in such manner as they consider appropriate.

• (4) Subsections (5) to (7) apply where 2 financial years fall within a qualifying period.

• (5) Generation attributed to a generating undertaking for that period is to be allocated, on a fair and reasonable basis, between those financial years.

• (6) The calculation in Step 2 of section 279(5) is to be applied separately to the generation allocated to each of those financial years by reference to the benchmark amount for that year.

• (7) Accordingly, the result of that Step is to be the sum of those calculations.

• (8) In this section—

• “consumer prices index” means the all items consumer prices index published by the Statistics Board;

• “financial year” means a period of twelve months ending with 31st March.

Calculation of exceptional generation receipts

Attribution of generation

282

• (1) The following amounts of generation, expressed in megawatt hours, are to be attributed to a generating undertaking for a qualifying period—

• (a) any grid connected electricity generation of a relevant generating station of the undertaking for the period, and

• (b) the amount given by multiplying—

• (i) the amount (if any) of grid connected electricity generation for the period of a relevant generating station that is operated by a qualifying partnership in relation to the undertaking (see section 291), by

• (ii) the qualifying proportion for that period (see that section).

• (2) For the purposes of this Part, a generating station is a generating station of a generating undertaking if—

• (a) in the case of an undertaking that is a company, it is operated by that company otherwise than in partnership with another person, and

• (b) in the case of an undertaking that is a group, it is operated by any member of that group—

• (i) including where the station is operated in partnership and all of the partners are members of the group, but

• (ii) not including where the station is operated in partnership and one or more of the partners are not members of the group.

• (3) “Grid connected electricity generation” of a relevant generating station for a qualifying period means—

• (a) electricity generated by the station in that period for the purpose of giving a supply to any premises or enabling a supply to be so given where that supply would involve the use of a licensed distribution system or a licensed transmission system, and

• (b) electricity that was, at any time, expected to be (but was not) generated by the station in that period for that purpose.

• (4) But for the purposes only of—

• (a) section 279(3) (application of levy threshold), and

• (b) Step 2 in section 279(5) (determination of maximum amount of receipts that would not be exceptional),

ignore any electricity that was expected to be, but was not, generated by a relevant generating station unless the electricity was not generated in connection with an accepted bid to decrease generation under a settlement code.

Generation receipts

283

• (1) Where generation is attributed to a generating undertaking under section 282(1) for a qualifying period, generation receipts in respect of that generation are to be attributed to that undertaking for that period.

• (2) In this Part “generation receipts” means amounts that it is fair and reasonable to attribute to generation attributed under section 282(1) (whether or not they are received by, or otherwise arise to the operator of the station) on the basis that the amounts reflect, directly or indirectly, the amount realised (or to be realised) for the wholesale purchase of electricity arising from that generation (whether or not the electricity is actually generated).

• (3) In determining the amounts realised (or to be realised) for the wholesale purchase of electricity the following are, amongst other things, to be taken into account—

• (a) amounts received in accordance with a settlement code in connection with accepted offers to increase generation (but not amounts in connection with accepted bids to decrease generation);

• (b) imbalance charges under such a code;

• (c) payments and receipts under arrangements whose principal purpose is to act as a hedge of the exposure to changes in the price of electricity where those arrangements relate to generation attributed under section 282(1).

• (4) The arrangements referred to in subsection (3)(c) may include arrangements comprising, or that include the use of, options, futures and contracts for difference (within the meaning of Part 7 of CTA 2009).

• (5) The Treasury may by regulations make provision about when amounts can (and cannot) be fairly and reasonably attributed to generation under subsection (2).

• (6) Regulations may also provide that—

• (a) amounts of a specified description are always to be treated as generation receipts;

• (b) amounts of a specified description are never to be treated as generation receipts.

“Specified” means specified in the regulations.

• (7) Subsection (8) applies to generation attributed to a generating undertaking under section 282(1) if—

• (a) provision, within the meaning of Part 4 of TIOPA 2010, has been made or imposed as between two persons by means of a transaction or series of transactions,

• (b) that provision relates to that generation,

• (c) if instead of that provision the arm's length provision had been made or imposed, one of those persons would have an amount that it is fair and reasonable to attribute the generating undertaking in accordance with subsection (2), and

• (d) were that person within the charge to corporation tax, their profits and losses would be calculated (as a result of Part 4 of TIOPA 2010) as if the arm's length provision had been made or imposed instead of the provision actually made or imposed.

• (8) Where this subsection applies to generation attributed to a generating undertaking, generation receipts in respect of it are to be determined as if the arm's length provision had been made or imposed instead of the provision actually made or imposed.

• (9) In this Part “the arm's length provision” has the meaning it has in Part 4 of TIOPA 2010.

Allowable costs

284

• (1) “Allowable costs” means—

• (a) exceptional generation fuel costs of relevant generating stations (see section 285),

• (b) exceptional revenue sharing costs in respect of relevant generating stations (see section 286), and

• (c) qualifying electricity purchase costs (see subsection (6)).

• (2) Allowable costs may only be attributed to a generating undertaking for a qualifying period to the extent—

• (a) those costs are fairly and reasonably attributable to generation receipts attributed to the undertaking for the period,

• (b) they reflect expenses of the undertaking (or, in the case of an undertaking that is a group, of one or more of its members), and

• (c) those costs are not already reflected in the determination of the amounts of those receipts.

• (3) Allowable costs are only to be attributed to a generating undertaking if a claim is made for those allowable costs in a company tax return.

In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1) of that Schedule).

• (4) Subsection (5) applies to allowable costs of a person (“the cost holder”) to be attributed to a generating undertaking if—

• (a) the costs arise as a result of provision made or imposed as between the cost holder and another person by means of a transaction or series of transactions, and

• (b) were the cost holder within the charge to corporation tax, the cost holder’s profits and losses would be calculated (as a result of Part 4 of TIOPA 2010) as if the arm's length provision had been made or imposed instead of the provision actually made or imposed.

• (5) Where this subsection applies to allowable costs, the amount of those costs is to be determined as if that arm's length provision had been made or imposed instead of the provision it arose as a result of.

• (6) In this section “qualifying electricity purchase costs” means costs reasonably incurred in the purchase of electricity in order to comply with the terms of an agreement under which it was expected that a relevant generating station will generate but does not do so.

Exceptional generation fuel costs

285

• (1) For the purposes of a claim for allowable costs by a generating undertaking, the amount (if any) of “exceptional generation fuel costs” of a relevant generating station for a qualifying period is to be determined as follows—

• Step 1 Determine the generation fuel costs for the station for that period.

• Step 2 Divide the amount of those costs by the amount of electricity generated by the station in that period (expressed in megawatt hours) that are attributable to a generating undertaking.

• Step 3 Determine the baseline fuel cost of the station.

• Step 4 If the result of Step 2 is the same as or less than the baseline fuel cost, there are no exceptional generation fuel costs of the station for that period.

• Step 5 If the result of Step 2 is greater than the baseline fuel cost, subtract the baseline fuel cost from the result of Step 2.

• Step 6 Multiply the amount of electricity generated by the station that is attributable to a generating undertaking in that period by the result of Step 5 to give the amount of exceptional generation fuel costs of the station for that period.

• (2) The “generation fuel costs” of a relevant generating station for a period means costs which, on a fair and reasonable basis, can be directly attributed to the acquisition of fuel used for generating electricity in that period (which may include the costs of transporting such fuel) that is attributable to a generating undertaking.

• (3) The baseline fuel cost of a relevant generating station is the lesser of—

• (a) the average generation fuel costs of the station per megawatt hour for the reference period specified in the claim for allowable costs, determined on a fair and reasonable basis (and which cannot be less than nil), and

• (b) £65 per megawatt hour.

• (4) Subject to subsection (5), the reference period that may be specified in the claim must—

• (a) be a period of at least 12 months in which there is a period of 3 months where the generating station was generating on 50% or more of the days in that 3 month period,

• (b) commence no earlier than 1 January 2017, and

• (c) end no later than 1 March 2020.

• (5) Where a reference period cannot be specified in the claim in accordance with subsection (4) because there is no period of at least 12 months between 1 January 2017 and 1 March 2020 in which there is a period of 3 months where the generating station was generating on 50% or more of the days in that 3 month period—

• (a) a period of 12 months commencing no earlier than 1 January 2017 and ending no later than 1 March 2020 may be specified as the reference period,

• (b) the average generation fuel costs of the station for the purposes of subsection (3)(a) is to be determined as a fair and reasonable estimate of what those costs would have been—

• (i) had the generating station been generating in that period, and

• (ii) had it been generating on a similar basis in that period as it had been generating in the period of 12 months ending with the end of the qualifying period to which the claim relates.

• (6) Where a generating station uses more than one type of fuel, a generating undertaking making a claim for allowable costs in respect of the exceptional fuel costs of that station may calculate the exceptional generation fuel costs in relation to each type of fuel separately, and may specify different reference periods for those calculations.

• (7) Where a generating undertaking makes a claim for allowable costs in respect of exceptional generation fuel costs of two or more generating stations that use the same type of fuel, the same reference period must be specified in relation to the calculation of exceptional generation costs in relation to fuel of the same type.

Exceptional revenue sharing costs

286

• (1) Subsection (2) applies for the purposes of determining the amount of allowable costs that may be claimed by a generating undertaking in respect of exceptional revenue sharing costs.

• (2) Take the following steps to determine the amount (if any) that can be claimed for a qualifying period—

• Step 1 Determine if there are any relevant generating stations whose generation has been attributed to the undertaking in relation to which there are qualifying arrangements under which payments are made to a third party in relation to the undertaking by reference to— the price received for generation by that station, or the wholesale price of electricity.

• Step 2 Determine the amounts paid, in respect of each of those arrangements.

• Step 3 In relation to each such payment, determine the amount that would have been paid if the price received for generation by the station in question and the wholesale price of electricity had been the benchmark amount and subtract that amount from the amount actually paid.

• Step 4 Add together the results of Step 3. If the result of Step 3 is nil or less the generating undertaking, no amount can be claimed. If the result of Step 3 is more than nil, that amount can be claimed (to the extent it is fairly and reasonably attributable to generation receipts attributed to the undertaking).

• (3) For the purposes of subsection (2), arrangements are “qualifying” if they are arrangements under which fuel for generating electricity is acquired and the requirement to make payments under the arrangements relates to that acquisition.

• (4) Where the arrangements provide for some or all of the cost of paying the levy to be passed to the third party (whether by way of reduction of payments or otherwise) no amount of allowable costs in relation to the arrangements may be claimed unless subsection (6) applies.

• (5) Subsection (6) applies where the arrangements provide for a fixed proportion of the cost of paying the levy to be passed to the third party.

• (6) Where this subsection applies, the proportion of the amount calculated under subsection (2) that is equal to the proportion of the costs of paying the levy that are not passed to the third party may be claimed.

• (7) In this section—

• “third party”, in relation to a generating undertaking, means a person that is not a significant equity holder in— where the undertaking is not a group, the undertaking, or where the undertaking is a group, any member of the group;

• a person (“P”), other than a member of a group of companies, is a “significant equity holder” in a company (“C”) if— P is beneficially entitled to 20% or more of any profits available for distribution to equity holders of C, P would be beneficially entitled to 20% or more of any assets of C available for distribution to its equity holders on a winding-up, or at least 20% of C‘s ordinary share capital is owned directly or indirectly by P;

• a member of a group of companies is a “significant equity holder” in a company (“C”) if— members of the group between them are beneficially entitled to 20% or more of any profits available for distribution to equity holders of C, members of the group between them would be beneficially entitled to 20% or more of any assets of C available for distribution to its equity holders on a winding-up, or at least 20% of C‘s ordinary share capital is owned directly or indirectly by members of the group.

Groups, partnerships and joint ventures

Groups

287

• (1) For the purposes of this Part, the following form a “group”—

• (a) a company that is not a 75% subsidiary of any other company, and

• (b) every company that is a 75% subsidiary—

• (i) of that company,

• (ii) of a 75% subsidiary of that company, or

• (iii) of a 75% subsidiary of a 75% subsidiary of that company, and so on.

• (2) The company in a group that is not a 75% subsidiary of any other company is the “principal member” of the group.

• (3) Every other member of the group is a “subsidiary member”.

• (4) A company (“B”) is a “75% subsidiary” of another company (“A”) if—

• (a) A is beneficially entitled to 75% or more of any profits available for distribution to equity holders of B,

• (b) A would be beneficially entitled to 75% or more of any assets of B available for distribution to its equity holders on a winding-up, or

• (c) at least 75% of B’s ordinary share capital is owned directly or indirectly by A.

• (5) Where as a result of the application of each of paragraphs (a) to (c) of subsection (4) a company would (ignoring this paragraph) be a member of more than one group, that company is to be treated as only being a 75% subsidiary of the first company it is a subsidiary of applying the rules in those paragraphs in order (starting with paragraph (a)).

• (6) If at any time a company that is a generating undertaking becomes a member of a group that is a generating undertaking (including a group that becomes a generating undertaking as a result of that company becoming a member), the final qualifying period of the company ends at that time.

• (7) If at any time a group ceases to be a group as a result of the principal member becoming a 75% subsidiary of another group, the final qualifying period of the group ends at that time.

Lead member of a group and its qualifying periods

288

• (1) For the purposes of section 280(2) (meaning of qualifying period), the reference to an accounting period of a generating undertaking that is a group means an accounting period of its lead member.

• (2) Take the following steps in order to identify the lead member of the group (stopping at the first step under which a member of the group is identified as the lead member)—

• Step 1 If there is a member of the group that— is within the charge to corporation tax, and is nominated for the purposes of this section, that member is the lead member of the group.

• Step 2 If the principal member of the group is within the charge to corporation tax, it is the lead member of the group.

• Step 3 If— there is a member of the group that— is within the charge to corporation tax, and has no 75% parent within the charge to corporation tax, and there is no other member of the group falling within paragraph (a), that member is the lead member of the group.

• Step 4 If there is more than one member falling within paragraph (a) of Step 3, the lead member is the member falling within that paragraph to which the greatest amount of generation would be attributed under section 282(1) in the period of 12 months ending with the later of 31 December 2022 and the beginning of the first qualifying period in which the group is a qualifying generating undertaking if— each such member were a generating undertaking, and that period of 12 months were a qualifying period.

• Step 5 If none of the preceding steps identifies a lead member, the principal member of the group (who will not be within the charge to corporation tax) is the lead member of the group.

• (3) For the purposes of subsection (2), a company (“P”) is a 75% parent of another company if that other company is a 75% subsidiary—

• (a) of P,

• (b) of a 75% subsidiary of P, or

• (c) of a 75% subsidiary of a 75% subsidiary of P, and so on.

• (4) A nomination of a member of a group as the lead member of the group—

• (a) is to be made by the member of the group that, ignoring Step 1 in subsection (2), would be the lead member of the group (“the nominating member”),

• (b) must be made by notice to HMRC,

• (c) must specify when it takes effect, which must be no earlier than the commencement of the qualifying period in which it is made, and

• (d) has effect until—

• (i) a further nomination takes effect,

• (ii) it is revoked, or

• (iii) the nominated member leaves the group.

• (5) The revocation of a nomination of a member of a group as the lead member—

• (a) is to be made by the member of the group that, ignoring Step 1 in subsection (2), would be the lead member of the group,

• (b) must be made by notice to HMRC, and

• (c) must specify when it takes effect, which must be no earlier than the commencement of the qualifying period in which it is made.

• (6) Where a company becomes lead member of a group during a qualifying period, and that period is not the same as an accounting period of the new lead member—

• (a) the qualifying period ends, and

• (b) a qualifying period commences that ends with the end of the current accounting period of the new lead member.

Liability of members of groups

289

Where a generating undertaking that is a group is liable to an amount of electricity generator levy—

• (a) the lead member is liable to pay that amount, and

• (b) every other member is jointly and severally liable for that amount.

Election for members with significant minority shareholding to pay levy

290

• (1) This section applies where—

• (a) a generating undertaking that is a group is liable to an amount of electricity generator levy for a qualifying period,

• (b) a subsidiary member of that group (“the relevant member”) has, at any time in that period, at least one significant minority shareholder,

• (c) some, or all, of that amount is attributable, on a fair and reasonable basis, to the activities of the relevant member and, if it has one or more relevant subsidiaries, those relevant subsidiaries.

• (2) Where this section applies, the lead member of the group may elect that so much of the amount as is attributable to the activities of the relevant member and (where it has one or more relevant subsidiaries) its relevant subsidiaries must be paid by that member.

• (3) But the other members of the group are jointly and severally liable for that amount.

• (4) An election under this section in respect of an amount of electricity generator levy for a qualifying period must be made no later than 9 months after the end of that period.

• (5) For the purposes of this Part—

• (a) a person (“P”) is a significant minority shareholder in a subsidiary member of a group (“S”) if P is not a member of the group and—

• (i) P is beneficially entitled to 10% or more of any profits available for distribution to equity holders of S,

• (ii) P would be beneficially entitled to 10% or more of any assets of S available for distribution to its equity holders on a winding-up, or

• (iii) at least 10% of S‘s ordinary share capital is owned by P, and

• (b) a group of companies (other than the group S is a member of) is a significant minority shareholder in S if—

• (i) members of the group are, between them, beneficially entitled to 10% or more of any profits available for distribution to equity holders of S,

• (ii) members of the group between them would be beneficially entitled to 10% or more of any assets of S available for distribution to its equity holders on a winding-up, or

• (iii) at least 10% of S‘s ordinary share capital is owned by members of the group.

• (6) For the purposes of this section and sections 296 and 297, a company is a relevant subsidiary of another company if it is a 75% subsidiary of—

• (a) that other company,

• (b) a 75% subsidiary of that other company, or

• (c) a 75% subsidiary of a 75% subsidiary of that other company, and so on.

Qualifying partnerships

291

• (1) A “qualifying partnership”, in relation to a generating undertaking, means a partnership that operates a relevant generating station whose partners include—

• (a) in the case of a generating undertaking that is a company, that company, or

• (b) in the case of a generating undertaking that is a group, at least one partner who is not a member of the group and at least one partner who is a member of the group.

• (2) For the purposes of subsection (1) of section 282, the qualifying proportion for a qualifying period in relation to a generating undertaking that is a company and a qualifying partnership in relation to that undertaking is the proportion of the partnership’s profits represented by the undertaking’s share of those profits.

• (3) For the purposes of that subsection, the qualifying proportion for a qualifying period in relation to a generating undertaking that is a group and a qualifying partnership in relation to that undertaking is the proportion of the partnership’s profits represented by the sum of the shares of those profits of each partner that is a member of the undertaking.

• (4) Part 17 of CTA 2009 (partnerships) applies for the purposes of this section as it applies for the purposes of corporation tax.

Qualifying joint ventures

292

• (1) For the purposes of this Part a company (“C”) is a “qualifying joint venture” if—

• (a) C is not a member of a group other than a group of which it is the principal member, and

• (b) there are five or fewer persons who between them—

• (i) hold 75% or more of C’s ordinary share capital, or

• (ii) in a case where C does not have ordinary share capital, are beneficially entitled to 75% or more of C's profits available for distribution to equity holders of C.

• (2) In determining whether there are five or fewer such persons as are mentioned in subsection (1)(b), the members of a group are treated as if they were a single company.

• (3) A company (“P”) that is not a member of a group is a participant in a qualifying joint venture (“V”) if—

• (a) P holds 10% or more of V’s ordinary share capital, or

• (b) in a case where V does not have ordinary share capital, P is beneficially entitled to 10% or more of V's profits available for distribution to equity holders of V.

• (4) A group of companies is a participant in a qualifying joint venture (“V”) if—

• (a) a member of that group, or two or more members between them, hold 10% or more of V’s ordinary share capital, or

• (b) in a case where V does not have ordinary share capital, a member of the group is, or two or more members between them are, beneficially entitled to 10% or more of V's profits available for distribution to equity holders of V.

• (5) Where a participant in a qualifying joint venture is not a generating undertaking, the participant is to be treated as a generating undertaking for the purposes of this Part.

Attribution and surrender of amounts: joint ventures and significant minority shareholders

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

293

• (1) Subsection (3) applies where the result of Step 4 in section 279(5) for a joint venture undertaking is greater than nil for a qualifying period.

• (2) For the purposes of this Part “joint venture undertaking” means a generating undertaking—

• (a) that is a qualifying joint venture, or

• (b) that is a group whose principal member is a qualifying joint venture.

• (3) The appropriate proportion of the non-chargeable amount in relation to the joint venture undertaking is to be added to the result of Step 4 in section 279(5) for each generating undertaking that is a participant in the qualifying joint venture (“the JV”) that comprises, or is the principal member of, the joint venture undertaking (and where Step 4 would not otherwise have been reached as a result of the second sentence of Step 3, ignore that sentence).

• (4) Where the qualifying period of the joint venture undertaking corresponds to a qualifying period of a participant of the JV, the whole of the appropriate proportion of the non-chargeable amount is to be added to the result of Step 4 for the participant for that period.

Otherwise, the appropriate proportion is to be apportioned, on a fair and reasonable basis, between the qualifying periods of the participant in which the qualifying period of the joint venture undertaking falls.

• (5) The non-chargeable amount for a qualifying period of the joint venture undertaking is so much of the result of Step 4 in section 279(5) for that period as is reduced as a result of Step 5 of that section.

• (6) To determine the appropriate proportion of the participants in the JV for a qualifying period of the joint venture undertaking take the following steps—

• Step 1 The generation receipts and allowable costs attributed to the joint venture undertaking for the period are to be allocated to the participants in the JV in proportion to the proportional interest each has in the JV at the time of the generation to which the receipts or costs relate.

• Step 2 In respect of each participant, subtract those allocated allowable costs from those allocated generation receipts. If the result of this Step is less than nil for any of the participants, the appropriate proportion for that participant is nil.

• Step 3 The appropriate proportion for any other participant is the amount given by dividing— the result of Step 2 in respect of that participant, by the result of Step 4 in section 279(5) for the joint venture undertaking— ignoring any amounts added to the result of that Step in accordance with subsection (3), and where the result of Step 2 for one or more of the participants is less than nil, increased by the sum of those results (each expressed as a positive number).

• (7) The proportional interest of a participant (“P”) in the JV at any time is—

• (a) the percentage of the JV’s ordinary share capital held—

• (i) where P is a generating undertaking which is a company, by P, or

• (ii) where P is a generating undertaking which is a group, by members of P, or

• (b) in a case where the JV does not have ordinary share capital, the percentage of the JV’s profits available for distribution to equity holders of the JV—

• (i) where P is a generating undertaking which is a company, to which P is beneficially entitled, or

• (ii) where P is a generating undertaking which is a group, to which members of P are beneficially entitled.

• (8) Where the appropriate proportion of the non-chargeable amount is required to be added to the result of Step 4 in section 279(5) for a generating undertaking that is not “qualifying” (see section 279(3)) in the qualifying period in which it is to be added, that undertaking is to be treated as qualifying for that period.

Generation acquired and supplied by JV participants

294

• (1) Subsection (3) applies to generation if —

• (a) the generation is attributed to a joint venture undertaking, other than in accordance with this section or sections 295 to 297,

• (b) it is supplied, directly or indirectly, to a generating undertaking (“Q”) that is a participant in the joint venture (“the JV”) that comprises, or is the principal member of, the joint venture undertaking, and

• (c) it is subsequently the subject of a wholesale purchase of electricity from Q.

• (2) Where the generation attributed to the joint venture undertaking is generation falling within section 282(3)(b) (generation expected to be generated which was not generated), reference in subsection (1) to supply or purchase is to any supply or purchase that was expected in consequence of that generation having occurred.

• (3) Where this subsection applies to generation—

• (a) the generation is to be attributed to Q (as well as to the joint venture undertaking),

• (b) in determining the amount of generation receipts to be attributed to the joint venture undertaking under section 283 in respect of that generation, do not take account of the transaction described in subsection (1)(c),

• (c) the generation attributed to Q as a result of paragraph (a) is to be attributed to Q for the qualifying period of Q in which the generation occurred,

• (d) subject to paragraph (f), the generation attributed to Q as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

• (e) in determining the amount of generation receipts to be attributed to Q under section 283 in respect of generation attributed as a result of paragraph (a), take account of the costs of the transaction under which the generation so attributed was acquired or was expected to be acquired, and

• (f) in determining the exceptional generation receipts of Q for a qualifying period of Q under section 279(5), any generation attributed to Q for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

• (4) But the amount generation that is to be attributed to Q in a qualifying period of Q under this section is not to exceed the amount of generation attributed to the joint venture undertaking in respect of that same period multiplied by the relevant proportion.

• (5) The “relevant proportion” for the purposes of subsection (4) and section 295(3) is—

• (a) the percentage of the JV’s ordinary share capital held—

• (i) where Q is a generating undertaking which is a company, by Q, or

• (ii) where Q is a generating undertaking which is a group, by members of Q, or

• (b) in a case where the JV does not have ordinary share capital, the percentage of the JV’s profits available for distribution to equity holders of the JV—

• (i) where Q is a generating undertaking which is a company, to which Q is beneficially entitled, or

• (ii) where Q is a generating undertaking which is a group, to which members of Q are beneficially entitled.

Arrangements that reflect receipts (JV participants)

295

• (1) Subsection (2) applies to generation if—

• (a) the generation is attributed to a joint venture undertaking, other than in accordance with this section or sections 294, 296 or 297,

• (b) a participant (“Q”) in the joint venture (“the JV”) that comprises, or is the principal member of, the joint venture undertaking is party to arrangements that result in amounts arising by reference to the generation,

• (c) those amounts would, if the joint venture undertaking, or a member of it, were party to those arrangements, be taken into account in determining the generation receipts of the joint venture undertaking, and

• (d) the generation—

• (i) is not supplied (directly or indirectly) to Q, or

• (ii) in the case of generation falling within section 282(3)(b) (generation expected to be generated which was not generated), was not expected to be supplied (directly or indirectly) to Q.

• (2) Where this subsection applies to generation—

• (a) the generation is to be attributed to Q (as well as to the joint venture undertaking),

• (b) the generation attributed to Q as a result of paragraph (a) is to be attributed to Q for the qualifying period of Q in which the generation occurred,

• (c) subject to paragraph (d), the generation attributed to Q as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

• (d) in determining the exceptional generation receipts of Q for a qualifying period of Q under section 279(5)—

• (e) any generation attributed to Q for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

• (3) But amount of generation that is to be attributed to Q in a qualifying period of Q under this section is not to exceed the amount given by subtracting—

• (a) the amount of generation attributed to Q in that period under section 294, from

• (b) the amount of generation attributed to the joint venture undertaking in respect of that same period multiplied by the relevant proportion (see section 294(5)).

Generation acquired and supplied by significant minority shareholders

296

• (1) Subsection (3) applies to generation if—

• (a) a subsidiary member (“A”) of a generating undertaking that is a group (“U”) has a significant minority shareholder that is a company or group,

• (b) the generation is generation by a relevant generating station operated by A or a relevant subsidiary of A (see section 290(6)),

• (c) the generation is supplied, directly or indirectly, to a significant minority shareholder (“M”) in A that is a company or a group, and

• (d) the generation is subsequently the subject of a wholesale purchase of electricity from M.

• (2) Where the generation falls within section 282(3)(b) (generation expected to be generated which was not generated), reference in subsection (1) to supply or purchase is to any supply or purchase that was expected in consequence of that generation having occurred.

• (3) Where this subsection applies to generation—

• (a) the generation is to be attributed to M (as well as to U),

• (b) in determining the amount of generation receipts to be attributed to U under section 283 in respect of the generation, do not take account of the transaction described in subsection (1)(d),

• (c) the generation attributed to M as a result of paragraph (a) is to be attributed to M for the qualifying period of M in which the generation occurred,

• (d) subject to paragraph (f), the generation attributed to M as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

• (e) in determining the amount of generation receipts to be attributed to M under section 283 in respect of generation attributed as a result of paragraph (a), take account of the costs of the transaction under which the generation so attributed was acquired or was expected to be acquired, and

• (f) in determining the exceptional generation receipts of M for a qualifying period of M under section 279(5), any generation attributed to M for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

• (4) Where the generation is generation by a relevant generating station operated in partnership and at least one of the partners is neither A nor a relevant subsidiary of A, only the qualifying proportion of that generation is to be attributed to M under subsection (3)(a).

• (5) For the purposes of this section and section 297, “the qualifying proportion” is the proportion of generation that is equal to the proportion of the partnership’s profits represented by the sum of A’s share of the partnership’s profits and the shares of those profits of any relevant subsidiaries of A (and Part 17 of CTA 2009 applies for the purposes of this subsection as it applies for the purposes of corporation tax).

• (6) But the generation that is to be attributed to M in a qualifying period of M is not to exceed the amount of generation that is attributable on a fair and reasonable basis to the activities of A and (where it has one or more relevant subsidiaries) its relevant subsidiaries in that same period multiplied by the relevant proportion.

• (7) The “relevant proportion” for the purposes of subsection (6) and section 297(4)(b) is—

• (a) the percentage of A’s ordinary share capital held—

• (i) where M is a generating undertaking which is a company, by M, or

• (ii) where M is a generating undertaking which is a group, by members of M, or

• (b) in a case where A does not have ordinary share capital, the percentage of A’s profits available for distribution to equity holders of A—

• (i) where M is a generating undertaking which is a company, to which M is beneficially entitled, or

• (ii) where M is a generating undertaking which is a group, to which members of M are beneficially entitled.

• (8) Where M is not a generating undertaking, M is to be treated as a generating undertaking for the purposes of this Part.

Arrangements that reflect receipts (significant minority shareholders)

297

• (1) Subsection (2) applies to generation if—

• (a) a subsidiary member (“A”) of a generating undertaking that is a group (“U”) has a significant minority shareholder that is a company or group,

• (b) the generation is generation by a relevant generating station operated by A or a relevant subsidiary of A (see section 290(6)),

• (c) a significant minority shareholder (“M”) in A that is a company or a group is party to arrangements that result in amounts arising by reference to the generation,

• (d) those amounts would be taken into account in determining the generation receipts of U if A or a relevant subsidiary of A (whichever operates the station) were party to the arrangements, and

• (e) the generation—

• (i) is not supplied (directly or indirectly) to M, or

• (ii) in the case of generation falling within section 282(3)(b) (generation expected to be generated which was not generated), was not expected to be supplied (directly or indirectly) to M.

• (2) Where this subsection applies to generation—

• (a) the generation is to be attributed to M (as well as to U),

• (b) the generation attributed to M as a result of paragraph (a) is to be attributed to M for the qualifying period of M in which the generation occurred,

• (c) subject to paragraph (d), the generation attributed to M as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

• (d) in determining the exceptional generation receipts of M for a qualifying period of M under section 279(5), any generation attributed to M for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

• (3) Where the generation is generation by a relevant generating station operated in partnership and at least one of the partners is neither A nor a relevant subsidiary of A, only the qualifying proportion of that generation (see section 294(4)) is to be attributed to M under subsection (2)(a).

• (4) But the amount of generation that is to be attributed to M in a qualifying period of M is not to exceed the amount given by subtracting—

• (a) the amount of generation attributed to M in that period under section 296, from

• (b) the amount of generation that is attributable on a fair and reasonable basis to the activities of A and (where it has one or more relevant subsidiaries) its relevant subsidiaries multiplied by the relevant proportion (see section 296(7)).

• (5) Where M is not a generating undertaking, M is to be treated as a generating undertaking for the purposes of this Part.

Surrender of shortfalls

298

• (1) This section applies where in an overlap period for two related generating undertakings—

• (a) one of those undertakings (“A”) has a shortfall amount for the overlap period, and

• (b) the other undertaking (“B”) has exceptional generation receipts for the overlap period.

• (2) To determine if an undertaking has a shortfall amount or exceptional generation receipts for an overlap period, carry out all of the steps in section 279(5) as if the period were a qualifying period, including steps that would normally be ignored because a result of nil or less has already been found.

• (3) If the result of Step 5 is less than nil, that result (expressed as a positive number) is a shortfall amount.

• (4) Where this section applies, an amount of the shortfall amount of A may be surrendered to B.

• (5) Section 299 sets out how much of the shortfall amount may be surrendered by A to B.

• (6) Two generating undertakings are related generating undertakings if—

• (a) one is—

• (i) a joint venture undertaking, or

• (ii) a generating undertaking that is a group that has at least one subsidiary member who has at least one significant minority shareholder, and

• (b) the other is a relevant shareholder in the other.

• (7) A generating undertaking (“C”) is a relevant shareholder in another generating undertaking (“D”) if—

• (a) where D is a joint venture undertaking, C is a participant in the joint venture that comprises, or is the principal member of, the joint venture undertaking, or

• (b) where D is a generating undertaking that is a group that has at least one subsidiary member who has at least one significant minority shareholder, C is a significant minority shareholder in a subsidiary member of D.

• (8) In this section “overlap period” in relation to two generating undertakings means—

• (a) where a qualifying period of one of the generating undertakings wholly corresponds with a qualifying period of the other, such a period, and

• (b) where a qualifying period of one generating undertaking does not wholly correspond with a qualifying period of the other, a period—

• (i) that commences at the same time as a qualifying period of one of them, and

• (ii) that ends with the earlier of the end of that qualifying period or the end of the last qualifying period of the other undertaking to commence on or before that qualifying period.

Amount that may be surrendered and use of that amount

299

• (1) Subject to subsection (7), the maximum amount of a shortfall amount that may be surrendered by a generating undertaking (“A”) to another (“B”) where A is a relevant shareholder in B, is the lesser of the amounts given by subsections (2) and (3).

• (2) The amount given by this subsection is the amount of the shortfall amount of A that is, on a fair and reasonable basis, referable to A’s interest in the generation attributed to B in the overlap period.

• (3) The amount given by this subsection is the amount of the exceptional generation receipts of B for the shortfall period that is, on a fair and reasonable basis, referable to A’s interest in the generation attributed to B in the overlap period.