Part 3 U.K. Multinational top-up tax

Modifications etc. (not altering text)

C1 Pt. 3 modified (2.12.2025) by Finance Act 2026 (c. 11), Sch. 8 paras. 32, 53(3)

Chapter 4 U.K. Calculation of adjusted profits of members of a multinational group

Adjusted profits of a member of a multinational group U.K.

135 Underlying profits of permanent establishments U.K.

(1) The underlying profits of a member of a multinational group that is a permanent establishment are the member’s profits—

(a) if the member has separate financial accounts [F1 prepared in accordance with acceptable accounting standards], as reflected in those accounts, and

(b) if not, as reflected in the underlying profits accounts of the main entity, attributed between the permanent establishment and the main entity [F2 on the same principles as those set out in section 159(1), (2) or (3) (as the case may be)].

(2) If the member is a permanent establishment falling within paragraph (d) of section 232(2) (income of permanent establishment exempt from tax in territory of main entity) the member’s underlying profits are determined only by reference to its relevant income and relevant expenses.

(3) For the purposes of subsection (2)—

(a) the relevant income of the member is the income of the member that is exempted from tax in the territory where the main entity is located that is attributable to operations carried out outside the territory the main entity is located in, and

(b) the relevant expenses of the member are such of its expenses as are attributable to those operations and are not deducted for tax purposes in the territory of the main entity.

(4) Profits (as determined in accordance with this Part) of a permanent establishment are not to be taken into account in determining the adjusted profits of the main entity, and vice versa.

(5) But subsection (4)—

(a) does not apply to profits of a permanent establishment that are excluded from its profits as a result of an adjustment under section 159, and

(b) is subject to section 160 (attribution of losses between permanent establishment and main entity).

Textual Amendments

F1 Words in s. 135(1)(a) inserted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 6(a), 53(5)-(13)

F2 Words in s. 135(1)(b) substituted (with effect in accordance with Sch. 8 para. 53(5)-(13) of the amending Act) by Finance Act 2026 (c. 11), Sch. 8 paras. 6(b), 53(5)-(13)