MTT33200 - Calculating top-up amounts: Additional top-up amounts: Additional top-up amount following recalculation of prior period

In certain cases, it is necessary for a group to recalculate its top-up amounts for a prior period. Where the top-up amount increases as a result of a recalculation, a collective additional top-up amount will arise in accordance with section 206 of Finance (No.2) Act 2023.

There are four circumstances where such a recalculation is required:

  • the election to spread capital gains over 5 years (see MTT21270),
  • the recapture of a deferred tax liability (section 184(2) MTT27400),
  • a post filing adjustments of covered taxes resulting in a significant decrease in liability (see MTT25300), and
  • an adjustment where covered taxes are not paid (see MTT25320)

Additionally, a special additional top-up tax amount may arise under section 192 of the Act following a recalculation where a member subject to the deemed distribution tax election leaves the group. Any such amount is added to the collective additional amount following a recalculation.

A QDT credit will apply to the collective additional amount where the members accrue QDMTT in the current period.

The collective additional amount will then be allocated between members (see MTT33210).

Determining the collective additional amount

The following steps are taken to determine the total collective additional amount.

  • for each prior period, carry out the recalculation or recalculations required to establish the revised top-up amount for the members in that period.
  • determine whether there has been an increase to the top-up amount for any period.
  • add together the increases to the top-up amount, for each period where there was an increase.
  • add any special additional top-up tax amount.

QDT crediting

The members of the subgroup in the current period may be charged QDMTT for the collective additional amount. These amounts are credited against the collective additional amount for MTT purposes. For DTT purposes, there will be no QDT credit.

Where those members have another collective additional amount, or an ordinary top-up amount, the QDMTT accrued may need to be apportioned to determine the QDT credit applicable.

Note that different rules apply for QDT credits for a collective additional amount arising due to covered taxes being less than expected.

QDT crediting - Single collective additional amount and no top-up amount

Where there is no other top-up amount or collective additional amount, the collective additional top-up amount following recalculations will be reduced by the QDMTT amounts accrued, but not below nil.

QDT crediting – Two collective additional amounts

Where:

  • there are two collective additional amounts, and
  • the sum of:
    • those amounts
    • any ordinary top-up amount for the period
  • is less than or equal to the value of the QDMTT amounts accrued,

the collective additional amount arising due to covered taxes being less than expected will be reduced to nil.

Where:

  • there are two collective additional amounts, and
  • the sum of:
    • those amounts, and
    • any ordinary top-up amount for the period
  • exceeds the value of the QDMTT amounts accrued,

the following process will be used to determine the applicable QDT credit.

Step 1: Divide:

  • the value of the collective additional amount arising following recalculations

by

  • the sum of both collective additional amounts and any ordinary top-up tax amount.

Step 2: Multiply the result of Step 1 by the value of the QDMTT amounts.

Step 3: Reduce the collective additional amount arising following recalculation by the result of Step 2.

The collective additional amount arising following recalculation here includes any special additional top-up tax amount.

Example

The standard members in Territory A have a special additional top-up tax amount of 90, a collective additional amount arising due to covered taxes being less than expected of 7000, and an ordinary top-up tax amount of 2910.

Those standard members have accrued amounts of QDMTT arising in the present period of £9000.

To determine the QDT credit to be applied to the collective additional amount arising following recalculations:

Step 1: Divide 90 by (90 + 7000 + 2910 =) 1000 = 0.09

Step 2: Multiply the value of the QDMTT amounts by 0.09 (£9000 * 0.09 = 81)

Step 3: Reduce the collective additional amount of 90 by 81.

The collective additional amount arising following recalculations is therefore reduced to 9 by the QDT credit.