MTT21180 | Calculating the effective tax rate: Adjusted profits: Illegal payments

Expenses accrued by a member for illegal payments (such as bribes or kickbacks) are to be excluded when calculating the adjusted profits. Where such amounts are included in the underlying profits, an adjustment is required in accordance with section 145 of Finance (No.2) Act 2023.

Meaning of ‘illegal’

For this purpose, a payment is considered illegal if the making of the payment is (by itself or as part of wider conduct) an offence under the law of:

• the United Kingdom,

• the territory of the member, or

• the territory of the ultimate parent.