MTT33110 - Calculating top-up amounts: Additional top-up amounts: Additional top-up amount where covered taxes are less than expected - Allocation to members

A collective additional amount arising where covered taxes were less than expected is to be allocated between members of the group in accordance with section 204 of Finance (No.2) Act 2023.

Amounts so allocated are an additional top-up amount of the member.

A collective additional amount arising from a recalculation, including special additional top-up tax amounts, are allocated between members under a different rule (see MTT33210).

Method of allocation

The collective additional amount will be allocated to those members which:

  • have a negative covered tax balance, where
  • that balance (when expressed as a negative number) is less than the member’s adjusted profits multiplied by 15%.

The additional top-up amounts of each such member is determined by the following process:

Step 1: Calculate the amount given by subtracting:

  • each member’s negative covered tax balance, expressed as a negative number

from

  • its adjusted profits multiplied by 15%.

Step 2: Add together the amounts determined under Step 1.

Step 3: Divide the amount determined for each member under Step 1 by the result of Step 2.

Step 4: Multiply the result of Step 3 for each member by the collective additional amount.

Attributing additional top-up amount to responsible members

Additional top-up amounts are to be allocated to responsible members in the same was as ordinary top-up amounts.

Ordinarily, top-up amounts will not be allocated to a member with no adjusted profit. Therefore, where no member of the group in has made an adjusted profit in a territory, it would be impossible to allocate a top-up amount.

Where there is an additional top-up amount under section 203, the members in the territory with an additional top-up amount are treated as having adjusted profits for the purpose of attributing amounts to responsible members (see MTT61050). This ensures its additional top-up amount can be properly attributed to responsible members.

A member will be treated as having adjusted profits of the following amount:

  • its additional top-up amount,

divided by

  • 15%.

For example, a member of a loss-making group with an additional top-up amount of 45 is treated as having adjusted profits of 300.

This is not applicable for Domestic Top-up Tax, which has a different rule for bringing top-up amounts into charge (see MTT31100)