SolvedMTT09960 | Reference materials: Table of differences between Domestic Top-up Tax and Multinational Top-up Tax
From HM Revenue & Customs · Multinational Top-up Tax and Domestic Top-up Tax
Domestic Top-up Tax (DTT) is given effect in the legislation by applying the MTT rules in Part 3 Finance (No.2) Act 2023, with some modifications. These modifications are laid out in Part 4 Finance (No.2) Act 2023.
The table below provides references where the MTT legislation applies differently for DTT purposes.
In some cases the modification only applies for single entities, and not groups. The table is set out in sections to indicate this.
Differences applicable to both groups and single entities
| MTT Legislative Reference (Part 3 F(No.2)A23 unless noted) | Change | DTT Legislative reference(Part 4 F(No.2)A23 unless noted) | Effect/comments | HMRC guidance reference |
|---|---|---|---|---|
| Chapters 1, 2, 7 | Not applied | Section 266;Section 267;Section 267A;Section 268;Section 268A;Section 269;Section 270;Section 271 | The provisions in these chapters are replaced with equivalent provisions in Part 4 F(No.2)A23. | MTT01200 (overview);MTT10020 (scope);MTT10030 (excluded entities);MTT65000+ (chargeability) |
| Section 141 | Additional provision | Section 273C | For wholly-domestic groups and entities only, dividends or other distributions received from a protected cell company are treated as an excluded dividend. | MTT10140;MTT21140 |
| Section 184;Section 185;Section 187;Section 205 | Difference in application | Section 273B | Explains how the application of the rules upon entering Pillar Two differ for DTT. | MTT09150 |
| Section 185 | Difference in meaning of term | Section 273A | Alters meaning of “Pillar Two rules apply”. | MTT09150 |
| Section 187 | Difference in meaning of term | Section 273A | Alters meaning of “Pillar Two rules apply”. | MTT09150 |
| Section 173(1)(b);Sections 189-192 | Omission | Section 272(4)(a)l;Section 273(3)(pa) and (v) | Not applicable to DTT – Eligible distribution tax systems. | MTT01210 |
| Chapter 9A | Omission | Section 272(4)(c)Section 273(4)(z1) | Not applicable to DTT – Undertaxed profits rule | MTT62000+ |
| Section 182(2)(e) | Difference in application | Section 272(8)(da);Section 273(3)(ba) | Amounts of expense relating to generation or use of qualifying refundable tax credits are not to be excluded from the deferred tax expense. | MTT27150 |
| Section 193 | Difference in application | Section 272A | Top-up amounts are not allocated to covered bond vehicles where possible. | |
| Section 194(2)-(7);Section 203(3)-(7);Section 206(4)-(8) | Omission | Section 272(3)(a)-(c); section 273(3)(c)-(e) | Prevents circularity as these subsections concern deduction of QDMTT amounts. | MTT31020 |
| Schedule 14, Part 11 | Difference in application | Schedule 18, paragraph 5 | Penalties for failing to register are applied by Finance Act 2008, and penalties for errors are applied by Finance Act 2007. | |
| Schedule 16 | Difference in application | Section 276 | The transitional safe harbour is applied differently for wholly domestic groups and entities. | MTT15980 |
Differences only applicable to entity that is a member of a group
| MTT Legislative Reference (Part 3 F(No.2)A23 unless noted) | Change | DTT Legislative reference(Part 4 F(No.2)A23 unless noted) | Effect/comments | HMRC guidance reference |
|---|---|---|---|---|
| Chapters 3-6, 8 and 9;Schedule 14, Part 2-12;Schedule 16 | Change in terminology | Section 272(2);Schedule 18, paragraph 4(c);Section 276 | Read “group” instead of “multinational group” | N/a |
| Section 134(2)-(3) | Additional provision | Section 272(8)(a) | 134(3A) and (3B) insert an election that allows wholly-domestic groups to use UK GAAP as an alternative accounting standard even where conditions in 134(3) are not met. | MTT21020 |
| Section 138(g); Section 173(1)(e); Section 173(3); Section 173(4); Section 239(4)(a) | Additional provision | Section 272(8)(aa), (ab), and (f) | Modification to recognise a payment for group relief as a covered tax in relation to a member, subject to certain rules. | MTT25100 |
| Section 176(2)(i) | Substitution | Section 272(8)(b) | Where amounts of tax expense are reallocated from one group member to another, they are only to be included in the covered tax balance if they were reallocated under section 178(1). | MTT25210 |
| Section 178(1A) | Substitution | Section 272(8)(c)(i) | Prevents the allocation of a qualifying tax expense imposed by a non-UK territory under section 167 (hybrids). | MTT41470 |
| Section 178(2) | Omission | Section 272(8)(c)(ii) | Reallocation of tax expense for hybrid, transparent and reverse hybrid entities is capped in relation to mobile income. This cap does not apply for DTT purposes. | MTT41470 |
| Section 179(2) | Omission | Section 272(8)(d) | Reallocation of tax expense to CFC from CFC owner is capped in relation to mobile income. This cap does not apply for DTT purposes. | MTT25500 |
| Section 193 | Substitution | Section 272(3A) | A different mechanism is used to determine the top-up amount of an entity. | MTT31100 |
| Section 193 | Difference in application | Section 272(3A) (Substituted section 193A(2))section 272(9)-(11) | Top-up amounts of investment entities are included with the top-up amounts of standard members for charging purposes. | MTT31100MTT45210 |
| Section 225 | Omission | Section 272(4)(b) | Top-up amounts of investment entities are included with the top-up amounts of standard members for charging purposes. | MTT31100MTT45210 |
| Paragraph 2(4), schedule 16 | Difference in meaning of term | Section 273A(2)(d) | Alters meaning of “Pillar Two rules apply”. | MTT09150 |
Differences only applicable to single entities
| MTT Legislative Reference (Part 3 F(No.2)A23 unless noted) | Change | DTT Legislative reference(Part 4 F(No.2)A23 unless noted) | Effect/comments | HMRC guidance reference |
|---|---|---|---|---|
| Chapters 3-6, 8 and 9;Schedule 14, Parts 4-12;Schedule 16 | Change in terminology | Section 272(2);Schedule 18, paragraph 4(d);Section 276 | Read “entity” instead of “multinational group” or “member of a multinational group”. | N/a |
| Section 132 | Substitution | Section 273(2) | To determine the ETR of a single entity, a different step-by-step process is required. | MTT20100 |
| Section 249 | Difference in meaning of term | Section 273(3)(b) | A single entity will not have consolidated financial statements. The concept of “qualifying financial statements” in 266(10) takes its place. | MTT09520 |
| Various | Omission | Section 273(4);Schedule 18;Section 276(c)(iii) | Omits various sections, subsections and paragraphs that would have no application for a single domestic entity. | These omissions are not generally specified in guidance as they have no practical effect. |