Legislation – Finance (No. 2) Act 2023

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Part 3Multinational top-up tax

Chapter 5Covered tax balance

Eligible distribution tax systems: deemed taxes

192Recalculation where member leaves the group

(1)

This section applies where—

(a)

in an accounting period (“the relevant period”), a standard member of a multinational group (“D”) in a territory (“the relevant territory”)—

(i)

leaves the group,

(ii)

transfers all, or substantially all, of its assets to an entity who is not a member of the group or to an individual, or

(iii)

transfers all, or substantially all, of its assets to a member of the group that is not located in the relevant territory, and

(b)

the standard members (including D) of the group in the relevant territory (“the relevant members”) had, in previous accounting periods, one or more recapture amounts (each a “recapture period”).

(2)

Where this section applies, the following are to be recalculated for each recapture period—

(a)

the effective tax rate for the relevant members, and

(b)

the top-up amounts that those members would have in accordance with that recalculation.

(3)

In recalculating that rate and those amounts for each of those periods, deduct the amount of each recapture amount that was outstanding in the period (after any reduction under section 191 in that period) from the combined covered tax balance of those members for the period.

(4)

The relevant members have a special additional top-up tax amount under this section for the relevant period that is equal to the sum of the amounts given by—

(a)

subtracting the amount of top-up amounts those members had for each recapture period from the sum of the top-up amounts those members would have for that period as recalculated under subsection (2)(b), and

(b)

multiplying the result of paragraph (a) for each recapture period by the disposition recapture ratio for that period.

(5)

Subject to subsections (6) and (7), the disposition recapture ratio for an accounting period is the amount given by dividing—

(a)

the adjusted profits of D in that period, by

(b)

the result of Step 2 in section 132(1) for the relevant members for that period.

(6)

If either of the amounts described in paragraph (a) or (b) of subsection (5) is nil or less, the disposition recapture ratio is nil.

(7)

If (ignoring this subsection) the disposition recapture ratio would be greater than 1, it is to be treated as 1.

(8)

Sections 206 and 207 include further provision about special additional top-up tax amounts under this section.

(9)

Each of the amounts mentioned in subsection (10) for each affected period is to be treated, for the purposes of this Part, as the amount given by multiplying—

(a)

that amount, by

(b)

the amount given by subtracting the disposition recapture ratio for that period from 1.

(10)

Those amounts are—

(a)

the result of Step 2 in section 132(1) for those members for that period;

(b)

the combined covered tax balance of the standard members of the group in the relevant territory;

(c)

any recapture amount those members have in that affected period;

(d)

the substance based income exclusion for that period for that territory.

(11)

An accounting period is an affected period if it is—

(a)

a recapture period, or

(b)

the relevant period and the standard members of the group in the territory have one or more recapture amounts in that period.