Finance (No. 2) Act 2023

[F1 148A Transferable tax credits U.K.

(1) A tax credit is a transferable tax credit in relation to a member of a multinational group if—

(a) the member is—

(i) the person to whom the credit was originally granted (“the originator”), or

(ii) a person (“a purchaser”) who has acquired the credit (whether from the originator or anyone else), and

(b) the transferability condition is met in relation to the member.

(2) A transferable tax credit is a marketable transferable tax credit in relation to a member of a multinational group if—

(a) it is a transferable tax credit, and

(b) the marketable condition is met in relation to the member.

(3) Those conditions are met differently depending on whether the member is the originator or a purchaser.

(4) The transferability condition is met—

(a) in relation to the originator if, under the law of the territory in which the credit was granted, credits of that type may be transferred to a person or entity that is not connected with originator before the end of 15 months after the end of the accounting period in which the credit is granted, and

(b) in relation to a purchaser if, under the law of that territory, credits of that type may be transferred to a person or entity that is not connected with the purchaser—

(i) under the same or similar conditions as would apply to the originator, and

(ii) before the end of the accounting period in which it was transferred to the purchaser.

(5) The marketable condition is met—

(a) in relation to the originator, if—

(i) the credit is transferred to a person or entity that is not connected with the originator before the end of 15 months of the accounting period in which the credit was granted at a price equal to or in excess of 80% of its net present value, or

(ii) similar credits are traded between persons or entities that are not connected to each other before the end of 15 months of the accounting period in which they are granted, and are typically traded at a price equal to or in excess of 80% of their net present value, and

(b) in relation to a purchaser, if the purchaser acquired the credit from a person or entity that is not connected to the purchaser at a price equal to or in excess of 80% of its net present value.

(6) Subsections (7) and (8) apply for the purposes of determining the net present value of a tax credit.

(7) In making that determination, assume that the entity that holds it will be able to use it in the accounting periods in which it may be used.

(8) The discount rate to be used in making that determination is to be determined by reference to the return on debt instruments that are issued by the government of the territory in which the credit was granted—

(a) that have—

(i) the same, or a similar, maturity to the period over which the credit is to be used, or

(ii) in a case in which the credit is to be used over a period exceeding 5 years, a maturity of 5 years, and

(b) that are issued—

(i) in relation to a credit that has been transferred, in the accounting period in which the credit was transferred, or

(ii) in relation to a credit held that has not been transferred, in the accounting period in which it was granted.

(9) References in subsections (6) and (8) to an accounting period are—

(a) in relation to determining net present value in connection with determining whether the marketable condition is met by the originator, an accounting period of the originator, and

(b) in relation to determining net present value in connection with determining whether the marketable condition is met by a purchaser, an accounting period of the purchaser.

(10) Where a transferable tax credit is also a qualifying refundable tax credit, it is to be treated as not being a transferable tax credit for the purposes of this Part.]

Textual Amendments

F1 Ss. 148A-148C inserted (22.2.2024 with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 8(3)