MTT31020 - Calculating top-up amounts: Qualifying domestic minimum top-up tax credit (QDT credit)

A qualifying domestic top-up tax credit (QDT credit) arises for a period where a member accrues an amount of qualifying domestic minimum top-up tax for that period.

The QDT credit will reduce the total top-up amount for the territory (see MTT31010), in accordance with section 194(2)-(7) of Finance (No.2) Act 2023. Any collective additional amount (see MTT33000+) will also be reduced.

References to the “total top-up amount” on this page are to the total top-up amount as calculated prior to any reduction made in respect of QDT credits. Elsewhere, the term “total top-up amount” will refer to the amount determined after making reductions in respect of QDT credits.

Where the enforceability of an amount of qualifying domestic top-up tax is in question, it will be treated as not accruing.

See MTT15110 for guidance on the meaning of qualifying domestic minimum top-up tax.

Members do not have collective additional amount under section 206

Where:

  • the members in the territory do not have a collective additional amount, and
  • the total top-up amount is less than the sum of QDT credits for those members,

the total top-up amount is to be reduced to nil. Excess credits cannot be used elsewhere.

Where:

  • the members in the territory do not have a collective additional amount (see MTT33010), and
  • the total top-up amount for the territory is greater than the sum of QDT credits for those members,

the total top-up amount is to be reduced by the sum of QDT credits for those members.

Members have collective additional amount under section 206

Where:

  • the members in the territory have a collective additional amount, and
  • the sum of the total top-up amount and that collective additional amount is less than the sum of QDT credits for those members,

the total top-up amount and the collective additional top-up amount are both reduced to nil. Excess credits cannot be used elsewhere.

Where:

  • the members in the territory have a collective additional amount, and
  • the sum of the total top-up amount and that collective additional amount is equal to or greater than the sum of QDT credits for those members,

the total top-up amount is to be reduced by the amount given by the following formula:

  • the sum of those QDT credits,

multiplied by

  • the total top-up amount,

divided by

  • the sum of the total top-up amount and the collective additional amount.

The collective additional top-up amount will be reduced by the remainder of the QDT credit.

Example

A1 Group is a multinational group with members located in Territory A. For the 2025 period, the top-up tax for Territory A is £40 million. In the same period, the members in Territory A were charged a qualifying domestic top-up tax of £40 million, the enforceability of which is not in question. As a result, the members in Territory A have total QDT credits of £40 million.

For the 2024 period, the top-up tax for Territory A was originally calculated to be £25 million. However, due to post filing adjustments of covered taxes a recalculation was required, and the revised top-up tax for 2024 is now £35 million. Therefore, the members in Territory A have a total collective additional amount of £10 million.

For the 2025 period, the sum of the total top-up amount and the collective additional amount is £50 million. This exceeds the total QDT credits of £40 million for the period.

The total top-up amount for the 2025 period is to be reduced by:

  • the sum of the QDT tax credits of £40 million,

multiplied by

  • the total top-up amount of £40 million,

divided by

  • the sum of the total top-up amount and the collective additional amount of £50 million.

The QDT credit applied to the total top-up amount is therefore £32 million. This results in a total top-up tax amount, after applying the QDT credit, of £8 million.

The collective additional amount will be reduced by the remaining QDT credit of £8 million. This will be set against the collective additional top-up amount of £10 million, reducing it to £2 million.

Enforceability of qualifying domestic top-up tax in question

Where the enforceability of an amount of qualifying domestic top-up tax is in question, the qualifying domestic top-up tax will be treated as not accruing to the member.

This is set out in section 256A of Finance (No.2) Act 2023.

The enforceability of an amount will be considered to be in question if either:

  • the member disputes the enforceability of the amount on the relevant grounds, or
  • the tax authority of the territory in which the tax is imposed considers the amount to be unenforceable on the relevant grounds.

‘Relevant grounds’ are either:

  • that the amount is unenforceable on constitutional grounds or as a result of other superior law applying in the territory in which the tax is imposed, or
  • that the amount is unenforceable as a result of a specific agreement with the government of that territory as to the tax liability of the member or the group.

Where the enforceability ceases to be in question, the amount of tax will cease to be treated as not accruing to the member.

The enforceability ceases to be in question when:

  • the amount has been paid, and
  • the enforceability may no longer be disputed because either:
  • a settlement has been reached
  • the appeal period has passed and there is no reasonable prospect of an extension, or
  • the right to appeal has been exhausted.

Domestic Top-up Tax

This provision is not applicable for Domestic Top-up Tax purposes. This is because where Domestic Top-up Tax is chargeable, no other qualifying domestic top-up tax will be chargeable, so no QDT credit will arise.