Finance (No. 2) Act 2023

Chapter 1 Introduction and charge

121 Introduction to multinational top-up tax

(1) The purpose of this Part is to implement the provisions of the Pillar Two rules relating to top-up tax under the IIR (within the meaning of those rules).

(2) For that purpose, this Part makes provision for a tax payable in respect of members of multinational groups who are located in territories (outside the United Kingdom) where their rate of tax (as determined in accordance with this Part) is less than 15%.

(3) The tax is to be known as “multinational top-up tax”.

(4) Sections 122 to 124 set out the charge to multinational top-up tax and describe how it is to be calculated.

(5) Chapter 2 of this Part—

(a) sets out the meaning of “multinational group”;

(b) describes who the members of such a group are;

(c) identifies the ultimate parent of such a group;

(d) limits the application of this Part to multinational groups with an annual revenue of at least 750 million euros and that have at least one member in the United Kingdom (such a group is referred to in this Part as “qualifying”);

(e) sets out how to determine which members of a multinational group (“responsible members”) are responsible for paying the tax and which members they are responsible for.

122 Chargeable persons

(1) A person is chargeable to multinational top-up tax for an accounting period of a multinational group if the group is a qualifying multinational group in that period and—

(a) the person—

(i) is a responsible member of the multinational group at any time in that period,

(ii) is a body corporate or a partnership that is not a body corporate, and

(iii) is located in the United Kingdom, or

(b) the person is chargeable to tax in respect of an entity that is a responsible member of the multinational group at any time in that period.

(2) A person is chargeable to tax in respect of a responsible member of a multinational group if—

(a) the profits of the responsible member would, on the relevant assumptions, be the profits of the person for the purposes of income tax or corporation tax,

(b) the responsible member is located in the United Kingdom, and

(c) the responsible member is not—

(i) a body corporate, or

(ii) a partnership that is not a body corporate.

(3) The relevant assumptions are—

(a) that the responsible member has profits that are chargeable to income tax or corporation tax, and

(b) that the person is resident in the United Kingdom for the purposes of that tax.

(4) Where a partnership that is not a body corporate is chargeable to multinational top-up tax as a result of subsection (1)(a)—

(a) the responsible partners are liable to pay the tax, and

(b) the liability of the responsible partners to do so is joint and several.

(5) The references in subsection (4) to “the responsible partners” are to each member of the partnership at any time during the accounting period who—

(a) in the case of a partner that is an entity, is located in the United Kingdom, or

(b) in the case of a partner that is an individual, is tax resident in the United Kingdom.

(6) A partnership is to be regarded for the purposes of this section as continuing to be the same partnership regardless of a change in membership, provided that a person who was a member before the change remains a member after the change.

(7) Where more than one person is chargeable to tax in relation to the same responsible member of a qualifying multinational group as a result of the application of subsection (2), each of those persons is jointly and severally liable to multinational top-up tax.

123 Amount charged by reference to “top-up amounts”

Where a person is chargeable to multinational top-up tax for an accounting period as a responsible member of a qualifying multinational group or in respect of a responsible member of a qualifying multinational group, the amount (if any) the person must pay is determined as follows—

• Step 1

  Determine which, if any, of the multinational group’s members that the responsible member is responsible for have top-up amounts or additional top-up amounts for that period and the extent of those amounts.

• Step 2

  Determine how much of each of those amounts is to be attributed to the responsible member.

• Step 3

  Add together the amounts attributed to the responsible member.

• Step 4

  If the result of Step 3 is not expressed in sterling, convert the result of that Step to sterling.

124 How to calculate top-up amounts and attribute them

(1) Generally, a member of a multinational group in a territory will have a top-up amount for an accounting period if—

(a) the effective tax rate of the members of the group in that territory for that period is less than 15%, and

(b) that member has profits for that period.

(2) Chapter 3 of this Part sets out how to determine the effective tax rate of the members of a multinational group in a territory by reference to the profits of, and the taxes payable by, those members in that territory.

(3) Chapter 4 of this Part sets out how to calculate the profits of members of a multinational group.

(4) Chapter 5 of this Part sets out—

(a) which taxes (referred to in this Part as “covered taxes”) are to be considered in determining the effective tax rate of those members, and

(b) how to determine the amount of covered taxes allocated to those members.

(5) Chapter 6 of this Part sets out how to use the effective tax rate and profits of the members of a multinational group to determine the top-up amounts of those members.

(6) Chapter 7 of this Part sets out how to attribute those top-up amounts to a responsible member of the group.

(7) Chapter 8 of this Part contains provisions about—

(a) additional top-up amounts, and

(b) further adjustments that may need to be made (including provision about adjustments for restructuring of multinational groups).

(8) Chapter 9 of this Part sets out special provision for investment entities, joint venture groups and minority owned members (including provision that applies to those entities instead of provision in the previous Chapters).

(9) Chapter 10 of this Part contains definitions and other provisions relevant to the calculations and other determinations to be made for the purposes of multinational top-up tax and Chapter 11 contains general provision.

125 Administration of multinational top-up tax

Schedule 14 makes provision for—

(a) information returns which must be made in respect of multinational groups,

(b) assessments to multinational top-up tax,

(c) penalties, and

(d) other administrative matters.