Section 174 | Amount of covered tax balance

(1)To determine the covered tax balance of a member of a multinational group for an accounting period—^F1

Step 1Determine the amount of the qualifying current tax expense accrued by the member for that period.

Step 2Determine whether any amounts need to be excluded from that expense under section 175 (and adjust it accordingly).

Step 3Determine whether any amounts need to be reflected in that expense under section 176 (and adjust it accordingly).

Step 4If any amount of covered taxes is taken into account more than once in the qualifying current tax expense, adjust it so that the amount is only taken into account once.

(2)For the purposes of this Part, current tax expense is to be expressed—

(a)as a positive number where it represents an expense, and

(b)as a negative number where it represents a credit.

(3)If the result of subsection (1) is a negative amount that amount (expressed as a positive number) is a “negative covered tax balance”.

(4)If the result of subsection (1) is a positive amount, or nil, that amount is a “positive covered tax balance”.

(5)In this Part—^F2

references to the “covered tax balance” of a member of a multinational group are to a positive covered tax balance or a negative covered tax balance;

“qualifying current tax expense” means the amount of the current tax expense as reflected in the member’s partially adjusted profits to the extent the expense relates to covered taxes.

(6)For the purposes of the definition of “qualifying current tax expense” in subsection (5), the member’s “partially adjusted profits” are its underlying profits with the adjustments contained in the following sections applied—^F3

section 137A (use of substituted values);

section 139 (profits adjusted to be profits before consolidation adjustments to eliminate intragroup transactions);

section 140 (profits adjusted to be profits before certain purchase accounting adjustments).