Legislation – Finance (No. 2) Act 2023

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Part 3Multinational top-up tax

Chapter 6Calculation of top-up amounts

197Eligible tangible asset amount

F1(1)

To determine the eligible tangible asset amount of a member of a multinational group for an accounting period—

(a)

add together—

(i)

the sum of the recorded carrying values of each eligible tangible asset held by the member at the start of the period, and

(ii)

the sum of the recorded carrying values of each eligible tangible asset held by the member at the end of the period, and

(b)

divide the result of paragraph (a) by 2.

F2(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)

“Recorded” means F3values recorded for the purposes of preparing the consolidated financial statements of the ultimate parent F4(and not values as substituted as a result of any other provision of this Part).

(4)

For the purposes of this section “carrying value” means the carrying value of the asset including—

(a)

accumulated depreciation, amortisation or depletion,

(b)

amounts attributable to the capitalisation of eligible payroll costs and costs that would be eligible payroll costs were they not excluded costs under section 196(4), F5…

(c)

amounts attributable to any purchase accounting adjustment relating to the asset,

F6(d)

any impairment loss, and

(e)

so much of the reversal of a previous impairment loss as does not cause the carrying value to exceed the value it would have been had the impairment loss not been recognised,

but not including any positive difference between the value of an asset recorded from time to time and the value of an asset when it was acquired by the member, where that difference is solely attributable to a revaluation.

(5)

An asset is an eligible tangible asset if F7…—

(a)

F8it is of a type referred to in subsection (6), F9…

(b)

F10it is not an excluded asset F11and,

(c)

the filing member chooses to include the asset in calculating the substance based income exclusion for the period.

(6)

The types of asset are—

(a)

property, plant or equipment located in the same territory as the member;

(b)

natural resources located in that territory;

(c)

a right to use a tangible asset located in that territory under a lease;

(d)

a license or similar right to use a tangible asset located in that territory, provided that—

(i)

the right is granted by a government of that territory, and

(ii)

it is expected in granting the right that the member will, in using that right, incur significant expenditure in enhancing the value of tangible assets in that territory (whether or not those assets are subject to the right).

F12(6A)

Where an asset falling within paragraph (a), (c) or (d) of subsection (6) is only located in the same territory as the member for part of the period—

(a)

it is to be regarded for the purposes of this section as located in that territory for the whole period, but

(b)

where the proportion of the period in which the asset (or in the case of a right, the asset to which the right relates) is located in the territory is 50% or less, the carrying values for the purposes of subsection (1)(a) and (b) are to be multiplied by that proportion.

(7)

An asset is an excluded asset if it is of one of the following types—

(a)

property (including land or buildings) that is held for sale, lease or investment (whether such sale, lease or investment is to be carried out in the period or not);

(b)

an asset used in the course of core international shipping activity (see section 157);

(c)

an asset used in the course of ancillary international shipping activity (see section 158), subject to subsections (8) and (9).

F13(7A)

Where part of an asset comprising property is held by a member of a multinational group for lease, but another part of that property is retained for use by the member—

(a)

the parts are to be treated as separate assets for the purposes of this section and section 197A, and

(b)

the carrying value of the asset is to be allocated between the separate parts on a just and reasonable basis.

(8)

Where the member has an ancillary international shipping profit cap adjustment of more than nil for the period, only the eligible proportion of an asset used in the course of ancillary international shipping activity is to be treated as an excluded asset.

(9)

The eligible proportion is the proportion given by dividing—

(a)

the member’s ancillary international shipping profits for the period, by

(b)

the amount given by subtracting the member’s ancillary international shipping costs from the member’s ancillary international shipping revenue for the period.

F14(10)

A member of a multinational group that is a flow-through entity that is a responsible member of the group but which is not the ultimate parent is to be regarded as having an eligible tangible asset amount of nil (subject to the application of section 198ZB).