Policy paper

Multinational Top-up Tax and Domestic Top-up Tax — further amendments

Published 21 July 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)/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 and those necessary to ensure the UK’s legislation remains consistent with the commentary and administrative guidance to the GloBE rules agreed 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

In 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 in April 2022. In Autumn Statement 2022, it was announced that the Multinational Top-up Tax and Domestic Top-up Tax would be introduced from accounting periods beginning on or after 31 December 2023. It was announced in July 2024 that the undertaxed profits rule would be introduced from accounting periods beginning on or after 31 December 2024. Multinational Top-up Tax and Domestic Top-up Tax were introduced in Finance Act 2023.

Detailed proposal

Operative date

This measure will mainly take effect for accounting periods beginning on or after 31 December 2025, though some provisions may 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 the 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 undertaxed profits rule, which forms part of the Multinational Top-up Tax, was introduced in the 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 intragroup transactions
• adjustments to the way Domestic Top-up Tax is allocated
• 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 method of converting Domestic Top-up Tax amounts into sterling
• changes to the test of whether an instrument is to be regarded as equity or debt
• other minor amendments and corrections

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
Nil	Nil	Nil	Nil	Nil	Nil

This measure is not expected to have an Exchequer impact.

Economic 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.

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. 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 at PillarTwoConsultation@hmtreasury.gov.uk.