Legislation – Finance (No. 2) Act 2023

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Part 3Multinational top-up tax

Chapter 6Calculation of top-up amounts

F1198ZBEligible tangible asset amount: flow-through entities

(1)

A member of a multinational group that is a flow-through entity that is not the ultimate parent has a flow-through tangible asset amount for a territory for an accounting period if the member holds one or more assets in that territory and—

(a)

there is at least one other member of the group—

(i)

that is not a flow-through entity,

(ii)

that is located in that territory, and

(iii)

to whom a proportion of the underlying profits of the flow-through entity for the accounting period are allocated under section 168 (underlying profits of transparent entities) or, where the underlying profits of the entity are nil or less, would be so allocated if the flow-through entity had underlying profits of 100 euros, or

(b)

the entity—

(i)

is a flow-through entity to some extent for that period as a result of section 169 (certain non tax resident entities to be treated as flow-through entities),

(ii)

is not a flow-through entity to some extent for that period, and

(iii)

was created in that territory.

(2)

Sections 197 and 197A apply for the purposes of determining a flow-through tangible asset amount of a flow-through entity for a territory as they apply for the purposes of determining an eligible tangible asset amount but as if—

(a)

any reference in those sections to the territory of the member were to the territory to which the flow-through tangible asset amount relates, and

(b)

subsection (10) of section 197 were omitted.

(3)

Where a member of a multinational group that is a flow-through entity has a flow-through tangible asset amount for a territory for an accounting period, the eligible tangible asset amount of each member of the group falling within subsection (1)(a) for that period (which may be nil) is to be increased by the amount given by multiplying the flow-through tangible asset amount by the relevant proportion in relation to that member for that period.

(4)

The relevant proportion in relation to a member for an accounting period is the proportion of the underlying profits of the flow-through entity for that period—

(a)

in a case where the flow-through entity has underlying profits that exceed nil for that period, that is allocated to that member under section 168, or

(b)

in a case where the underlying profits of the flow-through entity for that period are nil or less, that would be allocated to that member if the flow-through entity had underlying profits of 100 euros.

(5)

Where a flow-through entity—

(a)

is a flow-through entity to some extent for an accounting period as a result of section 169,

(b)

is not a flow-through entity to some extent for that period, and

(c)

was created in a territory for which it has a flow-through tangible asset amount for that period,

the eligible tangible asset amount of that entity for that period (which may be nil) is to be increased by the amount given by multiplying that flow-through tangible asset amount by the relevant proportion in relation to that entity for that period.

(6)

The relevant proportion in relation to that entity for an accounting period is the proportion of the underlying profits of the entity for that period—

(a)

in a case where the entity has underlying profits that exceed nil for that period, that are not allocated to any other entity under section 168, or

(b)

in a case where the underlying profits of the entity for that period are nil or less, that would not be allocated to any other entity under that section if the entity had profits of 100 euros.

(7)

For the purposes of applying this section in relation to a multinational group whose ultimate parent is a flow-through entity, the ultimate parent is to be treated as not being a flow-through entity.