MTT09490 - Miscellaneous pages: Effective date of FA25 amendments and the retrospection election

In the Finance Act 2025, a number of amendments were made to the MTT legislation in Finance (No.2) Act 2023.

The commencement date for these amendments varies:

Where the retrospection election is made, the relevant amendments will all apply retrospectively for all members of the group from the implementation date.

The only provision to fall outside these categories is the transitional safe harbour anti-arbitrage rule (see MTT15990), which is effective from the 14 March 2024.

The retrospection nature is of a different nature to other MTT elections. It is set out in paragraph 63 in Part 3 of Schedule 4 of FA25.

Nature of the retrospection election

The retrospection election will apply on a group basis. It will also apply to any joint venture groups owned by the consolidated group that makes the election.

HMRC does not need to be notified that an election has been made. The retrospection election is in effect made when the group submits a self-assessment return that has been prepared on the basis that the election has been made.

Once an election has been made, it cannot be revoked.

An election will apply to every accounting period beginning before 31 December 2024, and cannot be made for only certain accounting periods (where there is more than one due to an accounting period of less than a year).

Conditions

The following conditions must be met for a retrospection election to be valid:

  • the election must be made on or before the day on which the first self-assessment return or below-threshold notification for the first accounting period beginning on or after 31 December 2023 is submitted, and
  • written consent must be given by all relevant members (see below).

Therefore, the group should obtain written consent by the date the self-assessment return is submitted.

See MTT53000 for guidance on the self-assessment return filing date.

Written consent

An election cannot be made without the written consent of:

  • every person chargeable to DTT (see MTT65020) that has (or would have) a DTT top-up amount or additional top-up amount for any period beginning prior to 31 December 2024, as a result of their membership of the group, under the following assumptions:
    • the retrospection election has been made, and
    • an election under section 271 to make a single member liable for DTT has not been made (see MTT65040)
  • every qualifying entity which has (or would have) DTT top-up amounts or additional top-up amounts for any period beginning prior to 31 December 2024, under those assumptions, and
  • every responsible member of the group other than the filing member (see MTT61030).

In effect, written consent is required from every responsible member and every member of the group that (disregarding any election to make a single member liable) will have a DTT top-up amount or additional top-up amount when the retrospection election has been made.

The filing member should retain evidence that the election was made and retain any records of written consent given in accordance with the record-keeping requirements (see MTT51500).

Where:

  • the filing member was unaware that a member needed to give consent at the time the election was made,
  • it was reasonable for the filing member to consider that the consent of that member was not required, and
  • the filing member obtains written consent from that person within a period of 60 days beginning on the day the filing member realised that the person needed to provide consent,

That written consent is treated as having been given prior to the election being made.

Requirement for written consent where companies have been struck off

The rules around the retrospection election were set in large part to ensure that no company within a group could have its liability retrospectively increased without its consent.

There are limited circumstances in which a member of a group which has been liquidated or struck off is, on the face of the law, required to consent to a retrospection election. Since the retrospection election clause was not published until late in 2024, groups may have liquidated members before this time, when they could not have been aware that it would impact their ability to make a retrospection election.

A company should not have been struck off or liquidated in circumstances where it was anticipating a DTT liability for the 2024 period. Therefore, the consent of struck off companies to a retrospection election should only potentially be required in the following two cases:

  • the struck off company had no liability at the time it was struck off, but would acquire one as a result of the retrospection election.
  • the struck off company would have had a liability at the time it was struck off, or as a consequence of the retrospection election, but a section 271 election to make a single member liable for DTT was in effect at the time it was struck off.

In these cases, HMRC will accept that consent of the struck off company is not required for the retrospection election to be made, as long as a valid section 271 election is in effect for the relevant periods.

Amendments subject to the retrospection election

The table below sets out the package of amendments to which the retrospection election applies.

Where an election is made these amendments will all take effect for accounting periods beginning on or after 31 December 2023 for all members of the group.

Amendments are included in the retrospection election even where HMRC considers the amendment to be entirely clarificatory. Therefore, it should not be inferred that an alternate interpretation of the original legislation is acceptable because an amendment has been made subject to the retrospection election.

Amendment title

Amended or inserted section(s) of Finance (No.2) Act 2023

Paragraph of Schedule 4, FA25

Multinational Top-up Tax manual reference

Use of substituted values

Sections 137A and 197

Paragraph 12

MTT21010, MTT32030

Flow-through entities

Sections 168, 169, 170, 178, and 240

Paragraphs 13-17

MTT41410, MTT41440, MTT41460,  MTT41470, MTT18030

Blended CFC regimes

Sections 180 and 180A

Paragraph 25

MTT25510, MTT25511

No allocation of deferred tax assets and liabilities under blended CFC regimes

Section 180

Paragraph 26

MTT25510

Cross-border allocation of current tax under cross-crediting regimes

Section 181A

Paragraph 27

MTT25520

Cross-border allocation of deferred tax

Section 181B

Paragraph 28

MTT27180

Extension of qualifying foreign tax credits

Section 183

Paragraph 29

MTT27160

Deferred tax recapture

Section 184

Paragraph 30

MTT27400

Existing deferred tax assets and liabilities arising under blended CFC regimes

Section 185

Paragraph 31

MTT27300

Substance based income exclusion: permanent establishments and flow-through entities

Sections 195-198, 198ZA, 198ZB, and 198ZC

Paragraphs 32-35

MTT32010, MTT32020, MTT32040

Eligible payroll costs

Section 196

Paragraph 36

MTT32020

Additional top-up amounts

Sections 203 and 206

Paragraph 37 and 38

MTT33100, MTT33200

Joint ventures

Sections 226, 227 and 266

Paragraphs 39-41, except paragraph 39(d)

MTT41610, MTT41620

Allocation of DTT

Sections 270 and 272 (substitution of section 193)

Paragraphs 42 and 43

MTT31100

DTT excluded entities

Section 267

Paragraph 44

MTT10030

De minimis rule

Sections 199 and 228

Paragraph 45

MTT30100, MTT41520

Transitional safe harbour

Part 2, Schedule 16

Paragraph 46

MTT15920, MTT15930, MTT15935

Inclusion ratio

Sections 201 and 223

Paragraphs 49 and 50

MTT61060, MTT45130

Minor amendments

Sections 141, 148A, 170, 171, 176B. 176C. 176D, 212, 215, 216, 217, 222, 242, 255, Schedule 14

Paragraphs 53 to 71, except paragraph 66.

MTT21140, MTT21420, MTT41450, MTT42010, MTT25400, MTT41200, MTT44030, MTT45170, MTT21290, MTT25300, MTT45150, MTT17000, MTT51100, MTT51450

Amendments that apply retrospectively regardless of the retrospection election

The table below sets out the amendments which apply retrospectively whether or not the retrospection election has been made.

These amendments take effect from the implementation date of MTT.

These amendments are those which HMRC considers to be beneficial to taxpayers in all circumstances. However, amendments that reflect unilateral UK policy choices are included in the retrospection election, even if they would otherwise fall into this category.

Amendment title

Amended or inserted section(s) of F(No.2)A23

Paragraph of Schedule 4, FA25

MTT guidance manual reference

Permanent establishments as excluded entities

127

Paragraph 11

MTT10210

Joint venture conditions

226

Paragraph 39(d)

MTT41610

Removal of requirement for SBIE election

195

Paragraph 48

MTT32010

Specification of territories and taxes

241, 246, Schedule 16A

Paragraph 51

MTT09970

Filing etc not required before 30 June 2026

Schedule 14

Paragraph 52

MTT52010, MTT53010, MTT54100

Minor amendment (top-up amount of investment entity)

220

Paragraph 66

MTT45120

Amendments that apply prospectively regardless of the retrospection election

The table below sets out the amendments which apply prospectively whether or not the retrospection election has been made.

These amendments take effect for periods beginning on or after 31 December 2024, except for the anti-arbitrage rule.

The anti-arbitrage rule was announced by ministerial statement on 14 March 2024, and the provision applies prospectively from that date in accordance with paragraph 42(2). Paragraph 42(3)-(5) consists of minor consequential changes which apply prospectively for periods beginning on or after 31 December 2024.

Amendment title

Amended or inserted section(s) of F(No.2)A23

Paragraph of Schedule 4, FA25

MTT guidance manual reference

Tax equity partnerships

176D-176F

Paragraph 18-24


Joint venture conditions

226

Paragraph 39(a)-(c)

MTT41610

Transitional safe harbour anti-arbitrage rule

Sch16, paras 6A and 6B; Sch16 para 4; section 155; Sch17

Paragraph 47

MTT15990