Schedule 16A | Multinational top-up tax: safe harbours ^F1

Part 1Qualifying domestic top-up tax safe harbour^F1

Chapter 1Qualifying domestic top-up tax safe harbour election^F1

(1)The filing member of a multinational group may make a qualifying domestic top-up tax safe harbour election for an accounting period in respect of a territory.^F1

(2)The effect of the election is that all of the standard members of the group located in the territory are to be treated as not having top-up amounts or additional top-up amounts for the purpose of determining the liability of any member of the group to multinational top-up tax.^F1

(3)An election is only valid for an accounting period if—^F1F2

(a)a qualifying domestic top-up tax applies in that territory for that period,^F1

(b)that tax is accredited for the purposes of the election (see paragraph 2), ...^F1F3

(ba)the accreditation applies to the accounting period, and^F1F4

(c)none of the disqualifying conditions in paragraph 3 apply for that period.^F1

(4)Paragraph 2 of Schedule 15 (annual elections) applies to an election under this paragraph.^F1

(5)If for an accounting period—^F1F5

(a)the application of a qualifying domestic top-up tax in relation to the members of a multinational group located in a territory depends on the making by any person of an election or claim, and^F1F5

(b)the tax does not apply in relation to those members because such an election or claim is or is not made,^F1F5

sub-paragraph (3)(a) has effect in relation to the group as though the tax did not apply in the territory for the period.

(1)A qualifying domestic top-up tax is accredited for the purposes of an election under paragraph 1 if that tax is specified as such in , or in accordance with, regulations made by the Treasury.^F1F6F7

(1A)Regulations may provide for the accreditation of a tax by specification in a notice published by the Commissioners for His Majesty’s Revenue and Customs in accordance with the regulations.^F1F8

(1B)Regulations, or a notice, must identify the accounting periods to which the accreditation applies.^F1F8

(1C)Regulations under this paragraph may provide for the accreditation of a tax to have effect from a time before the tax was specified (but may not provide for the accreditation of a tax to cease to have effect in relation to accounting periods commencing before the regulations are made).^F1F8

(2)Repealed^F9F1

(3)Repealed^F10F1

(1)The following conditions are disqualifying conditions for the purposes of paragraph 1(3)(c) in relation to a multinational group and a territory.^F1F11

(2)Condition A is that—^F1

(a)the ultimate parent is located in the territory,^F1

(b)the ultimate parent is a flow-through entity, and^F1

(c)the qualifying domestic top-up tax applying in the territory—^F1

(i)does not generally impose a charge on the ultimate parent as a result of it being a flow-through entity, and^F1

(ii)does not include provision for a charge to be imposed on the ultimate parent in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.^F1

(3)Condition B is that—^F1

(a)a responsible member of the group is located in the territory,^F1

(b)the member is not the ultimate parent of the group,^F1

(c)the member is a flow-through entity, and^F1

(d)the qualifying domestic top-up tax applying in the territory—^F1

(i)does not generally impose a charge on the member as a result of it being a flow-through entity, and^F1

(ii)does not include provision for a charge to be imposed on the member in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.^F1

(4)Condition C is that—^F1

(a)the qualifying domestic top-up tax applying in the territory provides that it does not apply to a multinational group in the initial phase of the group’s international expansion,^F1

(b)that provision is not limited in application to circumstances where the members of a multinational group in the territory are not subject to Pillar Two rules, and^F1

(c)that provision applies to the group.^F1

(5)Condition D is that the enforceability of an amount of qualifying domestic top-up tax accruing to a standard member of the group is in question.^F1

(6)Subsections (3), (4) and (6) of section 256A (qualifying domestic top-up tax treated as not accruing where contested) apply for the purpose of determining whether the enforceability of an amount of qualifying domestic top-up tax is in question.^F1

(7)Condition E is that—^F1F12

(a)a member of the group located in the territory has a relevant pre-entry deferred tax asset or relevant pre-entry deferred tax liability, and^F1F12

(b)the qualifying domestic top-up tax applying in the territory either—^F1F12

(i)does not make provision corresponding to section 185(7A) to (7D) (exclusion for deferred tax assets arising as a result of government arrangements etc) in relation to relevant pre-entry deferred tax assets and relevant pre-entry deferred tax liabilities, or^F1F12

(ii)makes such corresponding provision in a way that is inconsistent with the Pillar Two commentary in relation to relevant pre-entry deferred tax assets or relevant pre-entry deferred tax liabilities.^F1F12

(8)In subsection (7) “relevant pre-entry deferred tax asset” and “relevant pre-entry deferred tax liability” have the same meaning as in Schedule 16, but for that purpose the words “or (7C)” in the definition of “relevant pre-entry deferred tax asset” are to be disregarded.^F1F12

(9)Condition F is that the qualifying domestic top-up tax applying in the territory is not charged in respect of a member of the group located in the territory because of an exemption (however framed) or special regime relating to persons concerned in securitisation transactions.^F1F13

Chapter 2Application to non-standard members of a multinational group^F1

(1)For the purpose of applying Chapter 1 of this Part of this Schedule to a joint venture group (see section 227 which applies this Schedule generally, with modifications, to joint venture groups), that Chapter has effect as if in paragraph 3—^F1

(a)Repealed^F14F1

(b)at the end there were inserted the following disqualifying condition—^F1F15F16F17

(a)does not generally impose a charge on ... members of a joint venture group, and

(b)does not include provision for a charge to be imposed on such members in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.

(2)For that purpose ignore section 227(1)(a) (reference to ultimate parent treated as reference to joint venture parent).^F1

(3)Accordingly, the filing member of a multinational group may make a separate qualifying domestic top-up tax safe harbour election in respect of joint venture members of a joint venture group in a territory.^F1

(1)Chapter 1 of this Part of this Schedule to applies to investment entities and has effect for that purpose as if—^F1

(a)references to standard members of a multinational group were to members of the group that are investment entities, and^F1

(b)in paragraph 3—^F1

(i)Repealed^F18F1

(ii)at the end there were inserted the following disqualifying condition—^F1F19F20

(a)does not generally impose a charge on members of the group that are investment entities, and

(b)does not include provision for a charge to be imposed on such members in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.

(2)Accordingly, the filing member of a multinational group may make a separate qualifying domestic top-up tax safe harbour election in respect of members of the group that are investment entities.^F1

(1)Chapter 1 of this Part of this Schedule to applies to minority owned members of a multinational group and has effect for that purpose as if references to standard members of a multinational group were to members of the group that are minority owned members.^F1

(2)Accordingly, the filing member of a multinational group may make a separate qualifying domestic top-up tax safe harbour election in respect of minority owned members of the group.^F1

Part 2Untaxed amounts: international expansion of groups^F21

(1)This paragraph applies to a multinational group for an accounting period if—^F21

(a)it meets the international expansion condition for that period, and^F21

(b)the accounting period is the first accounting period in which the group came within the scope of Chapter 9A, or any of the following 4 accounting periods.^F21

(2)If this paragraph applies to a multinational group for an accounting period—^F21

(a)no member of the group has an untaxed amount relating to that period, and^F21

(b)no joint venture group has an untaxed amount in relation to the multinational group relating to that period.^F21

(3)A multinational group meets the international expansion condition for an accounting period if—^F21

(a)the group does not have members located in more than 6 territories, and^F21

(b)the sum of the values of tangible fixed assets of qualifying members of the group, other than members located in the reference territory, for that period does not exceed 50 million euros.^F21

(4)For the purposes of this paragraph—^F21

(a)the value of tangible fixed assets of a qualifying member of a multinational group is to be determined in accordance with section 229H, and^F21

(b)the “reference territory” is the territory for which the sum of the values of tangible fixed assets of qualifying members of the group located in that territory is greatest.^F21

(5)The first accounting period in which a multinational group comes within the scope of Chapter 9A is the later of—^F21

(a)the first accounting period for which it meets Condition A in section 129(2) (annual revenue exceeds 750 million euros), and^F21

(b)the first accounting period beginning on or after the day on which section 229C (allocation of untaxed amount to members) comes into force for any purpose.^F21

(6)For the purposes of this paragraph, “territory” does not include the nominal territory of a stateless member of a multinational group (see section 132(3)(b)).^F21F22

Part 3Simplified calculations for non-material members of group^F23

(1)The filing member of a multinational group may for an accounting period make an election under this paragraph in respect of one or more members of the group in a territory.^F23

(2)An election may be made only if for the accounting period in question—^F23

(a)the specified members are non-material members of the group,^F23

(b)the accounting conditions are met, and^F23

(c)any of the following is met—^F23

(i)the routine profits test;^F23

(ii)the de minimis test;^F23

(iii)the effective tax rate test.^F23

(3)Where an election is made, the total top-up amount for the accounting period for the territory is assumed to be nil for the purpose of determining the liability of any member of the group to multinational top-up tax.^F23

(4)Paragraph 2 of Schedule 15 (annual elections) applies to an election under this paragraph.^F23

(9)For the purposes of paragraph 8(2)(a), a member of a multinational group is a “non-material member” of the group for an accounting period if for the period in question—^F23

(a)the member’s assets, liabilities, income, expenses and cash flows are not included in the consolidated financial statements of the ultimate parent on a line-by-line basis,^F23

(b)their non-inclusion in those statements is solely on the grounds of size or materiality, and^F23

(c)an external auditor has agreed (without qualification) to their non-inclusion in those statements on those grounds,^F23

or if for the period in question the member is a permanent establishment of a member that meets the conditions in paragraphs (a) to (c).

(1)For the purposes of paragraph 8(2)(b), “the accounting conditions” for an accounting period are—^F23

(a)that consolidated financial statements falling within section 249(1)(a) or (c) have been prepared by the ultimate parent of the group,^F23

(b)that those consolidated financial statements have been externally audited, and^F23

(c)that financial statements have been prepared in accordance with an acceptable accounting standard or an authorised accounting standard in respect of any specified member whose revenue exceeds 50 million euros.^F23

(2)The reference in sub-paragraph (1)(c) to the revenue of a specified member is to its revenue as it would be determined under the country-by-country reporting rules.^F23

(1)For the purposes of paragraph 8(2)(c), “the routine profits test” is met for an accounting period if, on the assumption in sub-paragraph (2), the result of Step 4 in section 194 would be nil or less for the period for the relevant territory.^F23

(2)The assumption is that for the period in question the adjusted profits of each specified member are equal to the revenue of that member as it would be determined under the country-by-country reporting rules.^F23

(1)For the purposes of paragraph 8(2)(c), “the de minimis test” is met for an accounting period if, on the assumption in sub-paragraph (2), an election under section 199 (de minimis exclusion) could be made for the period for the relevant territory.^F23

(2)The assumption is that for the period in question—^F23

(a)the revenue of each specified member, and^F23

(b)the adjusted profits of each specified member,^F23

is or are equal to the revenue of that member as it would be determined under the country-by-country reporting rules.

(1)For the purposes of paragraph 8(2)(c), “the effective tax rate test” is met for an accounting period if, on the assumption in sub-paragraph (2), the effective tax rate of the standard members of the group in the relevant territory for the period would be 15% or more.^F23

(2)The assumption is that for the period in question—^F23

(a)the adjusted profits of each specified member are equal to the revenue of the member as it would be determined under the country-by-country reporting rules, and^F23

(b)the covered tax balance of each specified member is equal to the member’s income tax expense as it would be determined under the country-by-country reporting rules.^F23

(14)In this Part of this Schedule, in relation to an election under paragraph 8—^F23

“the country-by-country reporting rules” means—

where legislation implementing the OECD’s guidance on country-by-country reporting has effect in the relevant territory, that legislation;

otherwise, that guidance;

“the relevant territory” means the territory in which the specified members are located;

“the specified members” means the members of the group in respect of which the election is made.

(15)Nothing in this Part of this Schedule requires a country-by-country report actually to be filed in respect of a multinational group in order for an election under paragraph 8 to be made.^F23