Section 180 | Blended CFC regimes

(1)This section applies to accounting periods commencing on or before 31 December 2025 that end on or before 30 June 2027.

(2)Subsection (3) applies where—

(a)a member of a multinational group (“C”) is subject to a blended CFC regime in an accounting period (“the relevant period”),

(b)C has an ownership interest in an entity (“F”) that is a ... CFC entity in relation to C, and^F1

(c)the blended CFC allocation key of F is greater than nil.

(3)The appropriate proportion of C’s current tax expense so far as relating to that regime (after all deductions and use of any losses) is—^F2

(a)where F is a member of the same multinational group as C, to be allocated to F, or

(b)where F is not a member of that group, to be excluded from the covered tax balance of C.

(4)The appropriate proportion is the proportion given by dividing the blended CFC allocation key for F for the relevant period by the sum of all blended CFC allocation keys for that period of ... CFC entities in which C has an ownership interest.^F3

(5)The blended CFC allocation key for the relevant period of a ... CFC entity that C has an ownership interest in is the amount given by multiplying—^F4

(a)the attributable income of C in relation to the CFC entity, by^F5

(b)the percentage given by subtracting the applicable effective tax rate of the ... CFC entity for the relevant period from the applicable CFC rate for that period.^F6

(6)But where—

(a)the result of subsection (5)(b) in relation to a ... CFC entity is less than nil, or^F7

(b)the applicable effective tax rate of that entity is greater than 15%,

the blended CFC allocation key for that entity is to be treated as nil.

(7)The attributable income of C in relation to a CFC entity in which C has an ownership interest means C’s share of the income of the entity for the relevant period determined as it would be determined for the purposes of the blended CFC regime.^F8F9

(8)The applicable effective tax rate of a ... CFC entity for the relevant period is—^F10

(a)where it is located in a territory in which a single effective tax rate of all members of the multinational group of which C is a member is calculated for that period, that effective tax rate as it would be calculated if—^F11

(i)any tax arising under a blended CFC regime were ignored, and

(ii)where the blended CFC regime permits foreign tax credit in respect of a qualifying domestic top-up tax on the same basis it would be permitted for covered taxes, that qualifying domestic top-up tax were a covered tax, or

(aa)where—^F12

(i)the CFC entity is a member of the multinational group,^F12

(ii)different effective tax rates are calculated for the period for different subsets of (one or more) members of the multinational group located in the territory where the CFC entity is located (“local blending subsets”), and^F12

(iii)the CFC entity is a member of a local blending subset,^F12

the effective tax rate of the local blending subset of which the CFC entity is a member, calculated on the assumptions set out in paragraph (a)(i) and (ii) (“the relevant assumptions”);

(ab)where—^F12

(i)the CFC entity is not a member of the multinational group, or is a member of the multinational group but not a member of any local blending subset, and^F12

(ii)different effective tax rates are calculated for the period for different local blending subsets,^F12

the effective tax rate, calculated on the relevant assumptions, of the local blending subset whose members have collectively the highest attributable income of C in relation to the CFC entity (as mentioned in subsection (5)(a));

(b)where no applicable effective tax rate can be determined under paragraphs (a) to (ab) the effective tax rate that would be calculated for the relevant period for the ... CFC entities located in that territory in which C has an ownership interest if—^F13F14F15

(i)those entities were members of a multinational group whose ultimate parent’s accounting period is the same as the relevant period,

(ii)the result of Step 2 in section 132(1) for those entities were the aggregate of their profits (and losses) before tax as shown in their financial accounts,^F16

(iia)the combined covered tax balance for those entities were the aggregate of the taxes shown in their financial accounts,^F16

(iii)any tax arising under a blended CFC regime were ignored, and

(iv)where the blended CFC regime permits foreign tax credit in respect of a qualifying domestic top-up tax on the same basis it would be permitted for covered taxes, that qualifying domestic top-up tax were a covered tax.

But this is subject to section 180A.

(9)The applicable CFC rate for the relevant period means the rate which reflects the threshold for low taxation by reference to which the blended CFC regime is generally operated, taking into account any credit for foreign taxes available under the regime.

(10)Repealed^F17