Legislation – Finance (No. 2) Act 2023

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Part 3Multinational top-up tax

Chapter 5Covered tax balance

F1Tax equity partnerships

176EFlow-through tax benefits: proportional amortisation method

(1)

Where this section applies, to determine the extent to which flow-through tax benefits provided to an investor in an accounting period under a tax equity partnership arrangement are qualifying, take the following steps—

Step 1

Determine the amount of capital investment provided by the investor to the arrangement at its commencement.
Step 2

Divide the F2flow-through tax benefits provided under the arrangement in the accounting period by the total flow-through tax benefits expected F3(as at the end of the accounting period) to be provided over the whole term of the arrangement.
Step 3

Multiply the result of Step 1 by the result of Step 2.
Step 4

Add the following together—
1. (a)
  the amounts, if any, of tax credits made available to be used by the investor under the arrangement in the accounting period;
2. (b)
  the value of the amounts, if any, of tax deductible losses made available to be used by the investor under the arrangement in the accounting period;
3. (c)
  the amounts, if any, of distributions made to the investor in the accounting period;
4. (d)
  the amounts, if any, received by the investor for the sale of any part of its investment in the arrangement in the accounting period.
Step 5

If the result of Step 3 is equal to or greater than the result of Step 4, all of the flow-through tax benefits provided under the arrangement in the accounting period are qualifying.

Otherwise proceed to Step 6.
Step 6

Subtract the result of Step 3 from the result of Step 4.
Step 7

The amount of the F4flow-through tax benefits provided under the arrangement in the accounting period that is qualifying is the amount given by reducing the amount of those benefits (but not below nil) by the result of Step 6.

(2)

Accordingly, the amount by which those benefits are reduced in accordance with Step 7 represents non-qualifying flow-through tax benefits which are to be reflected as a credit in the investor’s F5qualifying current tax expense.

F6(3)

Subsections (4) to (6) apply in relation to an investor, an arrangement and an accounting period if flow-through tax benefits were provided to the investor under the arrangement in at least one earlier accounting period.

(4)

Where the result of Step 3 in subsection (1) would (but for this subsection) be greater than N, this section has effect as if the result of Step 3 were N.

(5)

To find N—

(a)

identify the amount that was the result of Step 3 in subsection (1) in each earlier accounting period in which flow-through tax benefits were provided to the investor under the arrangement,

(b)

add together all the amounts identified under paragraph (a), and

(c)

subtract the result of paragraph (b) from the result of Step 1 in subsection (1).

The result is N, unless the result is below nil, in which case N is nil.

(6)

A reference in subsection (5)(a) to the result of Step 3 in subsection (1) in an earlier accounting period, where subsection (4) had effect in relation to the earlier period, is to the result of that Step as modified under subsection (4).