Multinational Top-up Tax and Domestic Top-up Tax

MTT01200 - Introduction: Overview of Domestic Top-up Tax

Domestic Top-up Tax (DTT) is a separate tax to Multinational Top-up Tax (MTT). Under DTT, qualifying entities located in the UK with an aggregate effective tax rate below 15% will be charged a top-up amount. This ensures that they will meet the minimum rate and not pay any other Pillar Two charge. This means the UK, rather than any other territory, will collect all of the top-up taxes in respect of UK profits.

DTT is calculated and administered in a largely similar way to MTT, with some exceptions. The guidance in this manual is generally applicable for both DTT and MTT, and references to MTT will also be references to DTT unless otherwise specified.

In the legislation (Part 4, Finance (No.2) Act 2023), the MTT provisions are replicated for DTT purposes with certain modifications.

See MTT01210 for a summary of the differences between DTT and MTT.

Scope

As well as the UK entities of multinational groups, wholly domestic groups and single entities can be in scope of DTT. Consequently, for DTT purposes, references to “multinational group” will mean any consolidated group or single entity that qualifies for DTT.

Aside from this, the scope for groups remains the same as it is for MTT, with the €750m revenue threshold applying in the same way to DTT. See MTT10000+ for guidance on scope and MTT11000+ for guidance on the revenue threshold.

Implementation date

DTT comes into effect for accounting periods beginning on or after 31 December 2023, as does MTT.

This is set out in section 278 of Finance (No.2) Act 2023.

Definitions

Terms defined for MTT purposes have the same meaning for DTT purposes, unless otherwise specified.

Substance based income exclusion

The substance based income exclusion will apply under DTT as well as MTT.

Treatment of DTT

DTT is designed to be treated as a Qualified Domestic Minimum Top-up Tax (QDMTT) by the OECD Inclusive Framework, as specified in section 265 of Finance (No.2) Act 2023. As a QDMTT, any DTT liability will be fully offset against any Pillar Two liabilities that may arise in other territories.