Multinational Top-up Tax and Domestic Top-up Tax

MTT09960 - Reference materials: Table of differences between Domestic Top-up Tax and Multinational Top-up Tax

Domestic Top-up Tax (DTT) is given effect in the legislation by applying the MTT rules in Part 3 Finance (No.2) Act 2023, with some modifications. These modifications are laid out in Part 4 Finance (No.2) Act 2023.

The table below provides references where the MTT legislation applies differently for DTT purposes.

In some cases the modification only applies for single entities, and not groups. The table is set out in sections to indicate this.

Differences applicable to both groups and single entities

MTT Legislative Reference (Part 3 F(No.2)A23 unless noted)	Change	DTT Legislative reference (Part 4 F(No.2)A23 unless noted)	Effect/comments	HMRC guidance reference
Chapters 1, 2, 7	Not applied	Section 266; Section 267; Section 267A; Section 268; Section 268A; Section 269; Section 270; Section 271	The provisions in these chapters are replaced with equivalent provisions in Part 4 F(No.2)A23.	MTT01200   (overview); MTT10020 (scope); MTT10030 (excluded entities); MTT65000+ (chargeability)
Section 141	Additional provision	Section 273C	For wholly-domestic groups and entities only, dividends or other distributions received from a protected cell company are treated as an excluded dividend.	MTT10140; MTT21140
Section 184; Section 185; Section 187; Section 205	Difference in application	Section 273B	Explains how the application of the rules upon entering Pillar Two differ for DTT.	MTT09150
Section 185	Difference in meaning of term	Section 273A	Alters meaning of “Pillar Two rules apply”.	MTT09150
Section 187	Difference in meaning of term	Section 273A	Alters meaning of “Pillar Two rules apply”.	MTT09150
Section 173(1)(b); Sections 189-192	Omission	Section 272(4)(a)l; Section 273(3)(pa) and (v)	Not applicable to DTT – Eligible distribution tax systems.	MTT01210
Chapter 9A	Omission	Section 272(4)(c) Section 273(4)(z1)	Not applicable to DTT – Undertaxed profits rule	MTT62000+
Section 182(2)(e)	Difference in application	Section 272(8)(da); Section 273(3)(ba)	Amounts of expense relating to generation or use of qualifying refundable tax credits are not to be excluded from the deferred tax expense.	MTT27150
Section 193	Difference in application	Section 272A	Top-up amounts are not allocated to covered bond vehicles where possible.
Section 194(2)-(7); Section 203(3)-(7); Section 206(4)-(8)	Omission	Section 272(3)(a)-(c); section 273(3)(c)-(e)	Prevents circularity as these subsections concern deduction of QDMTT amounts.	MTT31020
Schedule 14, Part 11	Difference in application	Schedule 18, paragraph 5	Penalties for failing to register are applied by Finance Act 2008, and penalties for errors are applied by Finance Act 2007.
Schedule 16	Difference in application	Section 276	The transitional safe harbour is applied differently for wholly domestic groups and entities.	MTT15980

Differences only applicable to entity that is a member of a group

MTT Legislative Reference (Part 3 F(No.2)A23 unless noted)	Change	DTT Legislative reference (Part 4 F(No.2)A23 unless noted)	Effect/comments	HMRC guidance reference
Chapters 3-6, 8 and 9; Schedule 14, Part 2-12; Schedule 16	Change in terminology	Section 272(2); Schedule 18, paragraph 4(c); Section 276	Read “group” instead of “multinational group”	N/a
Section 134(2)-(3)	Additional provision	Section 272(8)(a)	134(3A) and (3B) insert an election that allows wholly-domestic groups to use UK GAAP as an alternative accounting standard even where conditions in 134(3) are not met.	MTT21020
Section 176(2)(i)	Substitution	Section 272(8)(b)	Where amounts of tax expense are reallocated from one group member to another, they are only to be included in the covered tax balance if they were reallocated under section 178(1).	MTT25210
Section 178(1A)	Substitution	Section 272(8)(c)(i)	Prevents the allocation of a qualifying tax expense imposed by a non-UK territory under section 167 (hybrids).	MTT41470
Section 178(2)	Omission	Section 272(8)(c)(ii)	Reallocation of tax expense for hybrid, transparent and reverse hybrid entities is capped in relation to mobile income. This cap does not apply for DTT purposes.	MTT41470
Section 179(2)	Omission	Section 272(8)(d)	Reallocation of tax expense to CFC from CFC owner is capped in relation to mobile income. This cap does not apply for DTT purposes.	MTT25500
Section 193	Substitution	Section 272(3A)	A different mechanism is used to determine the top-up amount of an entity.	MTT31100
Section 193	Difference in application	Section 272(3A) (Substituted section 193A(2)) section 272(9)-(11)	Top-up amounts of investment entities are included with the top-up amounts of standard members for charging purposes.	MTT31100 MTT45210
Section 225	Omission	Section 272(4)(b)	Top-up amounts of investment entities are included with the top-up amounts of standard members for charging purposes.	MTT31100 MTT45210
Paragraph 2(4), schedule 16	Difference in meaning of term	Section 273A(2)(d)	Alters meaning of “Pillar Two rules apply”.	MTT09150

Differences only applicable to single entities

MTT Legislative Reference (Part 3 F(No.2)A23 unless noted)	Change	DTT Legislative reference (Part 4 F(No.2)A23 unless noted)	Effect/comments	HMRC guidance reference
Chapters 3-6, 8 and 9; Schedule 14, Parts 4-12; Schedule 16	Change in terminology	Section 272(2); Schedule 18, paragraph 4(d); Section 276	Read “entity” instead of “multinational group” or “member of a multinational group”.	N/a
Section 132	Substitution	Section 273(2)	To determine the ETR of a single entity, a different step-by-step process is required.	MTT20100
Section 249	Difference in meaning of term	Section 273(3)(b)	A single entity will not have consolidated financial statements. The concept of “qualifying financial statements” in 266(10) takes its place.	MTT09520
Various	Omission	Section 273(4); Schedule 18; Section 276(c)(iii)	Omits various sections, subsections and paragraphs that would have no application for a single domestic entity.	These omissions are not generally specified in guidance as they have no practical effect.