MTT21110 | Calculating the effective tax rate: Adjusted profits: Tax expense

Tax expense amounts should not be reflected in a member’s adjusted profits, in accordance with section 138 of Finance (No.2) Act 2023.

Underlying profits should therefore be adjusted to add back debits and exclude credits, where they relate to a tax expense amount.

A ‘tax expense amount’ is an amount of tax expense (including a deferred tax expense) in respect of the following types of tax:

• a covered tax (whether or not the income to which the tax relates is excluded from the adjusted profits)

• MTT, or any equivalent tax (see MTT09970 for qualifying taxes)

• a qualifying domestic top-up tax

• a qualifying undertaxed profits tax

• taxes accrued by an insurance company in respect of returns to policyholders, to the extent that section 152(2) applies in relation to those taxes (see MTT45430)

• a disqualified refundable imputation tax (see MTT25230)