MTT62920 | Charging mechanisms: Undertaxed Profits Rule: Transitional provisions: Transitional provision for international expansion

Where certain conditions are met, the Undertaxed Profits Rule (UTPR) contains a provision which deems there to be no untaxed amount for any member of a group or joint venture group where the group has a limited presence outside of the primary territory where it is located.

This is set out in Part 2 of Schedule 16A to Finance (No.2) Act 2023.

Conditions

For all members of the group or joint venture group to be deemed to have no untaxed amount the following conditions must be met by the multinational group:

• the current period must either be the first period for which the group is in scope of UTPR, or one of the four subsequent periods, and

• the international expansion condition must be met.

For this purpose, a group is first in scope of UTPR in the later of:

• the first period in which it meets the revenue threshold test (see MTT11010), and

• the first period beginning on or after 31 December 2024.

The group does not have to actually be subject to a UTPR in the first period in which it is considered to be ‘in scope of UTPR’.

International expansion condition

The international expansion condition is met where a group meets the following two conditions:

• it does not have members located in more than 6 territories (see MTT18010+), and

• the sum of the value of tangible fixed assets (see MTT62350) of qualifying members of the group, excluding those located in the ‘reference territory’, does not exceed 50 million euros.

The ‘reference territory’ is the territory with the greatest value of tangible fixed assets of qualifying members located in that territory.

As a stateless entity is treated as not being located in any territory, it does not count towards the total number of territories for the purposes of the international expansion condition.