Policy paper

Pillar 2: Further amendments to Multinational Top-up Tax and Domestic Top-up Tax

Published 26 November 2025

Who is likely to be affected 

Multinational groups with annual global revenues exceeding 750 million euros that have business activities in the UK. 

General description of the measure 

The Multinational Top-up Tax and Domestic Top-up Tax are the UK’s implementation of the Global Anti-Base Erosion (GloBE) rules agreed by the UK and other members of the Organisation for Economic Co-operation and Development (OECD) and G20 Inclusive Framework on Base Erosion and Profit Shifting. 

This measure updates UK legislation in line with administrative guidance published by the OECD in January 2025. It also makes amendments identified from stakeholder consultation or otherwise necessary to ensure the UK’s legislation remains consistent with the commentary and administrative guidance to the GloBE rules developed by the UK and other members of the Inclusive Framework. 

Policy objective 

This measure is part of Pillar 2 of the two-pillar solution to reform the international tax framework, which was developed by the UK and other members of the Inclusive Framework. 

It ensures that UK legislation remains consistent with the agreed GloBE rules, commentary and administrative guidance. 

Background to the measure 

On 8 October 2021, over 130 countries in the Inclusive Framework reached agreement on a two-pillar solution to reform the international tax framework in response to the challenges of digitalisation. The GloBE model rules, commentary and administrative guidance have been published by the OECD pursuant to this agreement. 

The agreement was followed by a consultation on the UK implementation of the GloBE rules which closed on 4 April 2022. In Autumn Statement 2022, it was announced that the Multinational Top-up Tax and Domestic Top-up Tax would be introduced for accounting periods beginning on or after 31 December 2023. It was announced on 29 July 2024 that the undertaxed profits rule would be introduced for accounting periods beginning on or after 31 December 2024. Multinational Top-up Tax and Domestic Top-up Tax were introduced in Finance (No. 2) Act 2023. 

Detailed proposal 

Operative date 

Most provisions in this measure will take effect for accounting periods beginning on or after 31 December 2025, though most will also be permitted to take effect from an earlier date at the election of affected taxpayers. 

However, the changes to the treatment of pre-regime deferred tax assets will take effect for accounting periods ending on or after 21 July 2025. 

Current law  

Multinational Top-up Tax and Domestic Top-up Tax were introduced in Finance (No.2) Act 2023 and have effect in respect of accounting periods beginning on or after 31 December 2023. 

Amendments to these taxes were made in Schedule 12 to Finance Act 2024 and Schedule 4 to Finance Act 2025. 

The part of Multinational Top-up Tax which forms the undertaxed profits rule was introduced by Finance Act 2025 and has effect for accounting periods beginning on or after 31 December 2024. 

Proposed revisions 

Parts 3 and 4 of Finance (No.2) Act 2023 will be amended to give effect to the following changes: 

• adjustments to provisions that set out how pre-regime deferred tax assets should be treated 

• technical amendments to the clawback provisions that apply to tax equity partnerships 

• simplified calculations for non-material members 

• changes to the rules allowing the profits of a flow-through ultimate parent entity to be reduced 

• adjustments to the election to exclude intra-group transactions 

• adjustments to the recognition of payments for group relief as a covered tax for Domestic Top-up Tax 

• technical adjustments to the test of whether de-merged groups meet the revenue threshold 

• technical adjustments to the application of Part 3 to permanent establishments 

• adjustments to the method for converting Domestic Top-up Tax amounts into sterling 

• changes to the test of whether an instrument is to be regarded as equity or debt 

• a provision under Multinational Top-up Tax which disapplies another jurisdictions’ Qualified Domestic Minimum Top-up Tax safe harbour where the Qualified Domestic Minimum Top-up Tax does not apply to securitisation vehicles 

• a provision which ensures no liability under the undertaxed profits rule can be applied to a securitisation vehicle 

• a provision which removes profits and losses relating to Real Estate Investment Trusts from adjusted profits for the purposes of Domestic Top-up Tax 

• a provision for certain overseas undertaxed profits taxes to have qualifying status in the UK prior to the making of UK regulations and ahead of the outcomes of the ongoing process for international agreement on qualification of undertaxed profits taxes 

• technical adjustments to cater for foreign Qualified Income Inclusion Rules and Qualified Domestic Minimum Top-up Taxes whose application is subject to an election or claim 

• technical adjustments to clarify the location of a stateless entity 

• technical adjustments to resolve double counting in relation to tax transparent investment entities 

• technical adjustments to the cross-border allocation of deferred tax  

• technical adjustments to the allocation of CFC mobile income 

• technical adjustments to clarify the meaning of underlying profits and underlying profits accounts 

• other minor amendments and corrections 

Summary of impacts 

Exchequer impact (£ million) 

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
nil	nil	nil	nil	nil	nil

This measure is not expected to have an Exchequer impact. 

Macroeconomic impact

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families 

There is expected to be no impact on individuals as this measure only affects businesses. The measure is not expected to impact on family formation, stability, or breakdown. 

Equalities impacts 

This measure only affects businesses, therefore it is not anticipated that there will be disproportionate impacts on those in groups sharing protected characteristics. 

Administrative impact on business including civil society organisations

This measure is expected to have a negligible administrative impact on the approximately 4,250 multinational enterprises with global revenues in excess of 750 million euros per annum and how they calculate their Multinational Top-up Tax and Domestic Top-up Tax liabilities. This is because this measure aims to ensure that the legislation works as was originally intended and is in line with OECD commentary.  

Businesses may incur negligible one-off costs such as familiarising themselves with the amendments. It is not anticipated there will be continuing costs. Customer experience is expected to remain broadly the same as it does not alter how businesses would interact with HMRC. 

This measure is not expected to impact civil society organisations. 

Operational impact (£ million) (HMRC or other) 

This measure will be delivered as part of the existing programme that has been established to implement Pillar 2 in the UK, so there are no further operational costs for HMRC. 

Other impacts 

Other impacts have been considered and none have been identified. 

Monitoring and evaluation 

The measure will be monitored through information collected from tax returns. 

Further advice 

If you have any questions about this, email the Pillar 2 Team: PillarTwoConsultation@hmtreasury.gov.uk.