MTT61030 - Charging mechanisms: The charge: Responsible members
An entity can be a responsible member if it is:
- the ultimate parent,
- an intermediate parent, or
- a partially owned parent (POPE).
A group may have more than one responsible member.
A responsible member will be chargeable for:
- all of the members of the group in which it has a direct or indirect ownership interest, except for those located in its own territory, and
- every permanent establishment for which it is the main entity.
This is set out in sections 128 of Finance (No.2) Act 2023.
Domestic Top-up Tax
Guidance on this page is not applicable for Domestic Top-up Tax, which does not include the concept of a responsible member. See MTT65020 for further guidance on DTT chargeability.
Ultimate parent
The ultimate parent will be a responsible member if it is subject to MTT or another qualifying Income Inclusion Rule applied by another territory for an accounting period.
See MTT09970 for a list of qualifying rules.
Intermediate parent
A member will be an intermediate parent if it has an ownership interest in another member of the group and it is not:
- a permanent establishment,
- an investment entity,
- a partially owned parent, or
- the ultimate parent.
An intermediate parent will be a responsible member if:
- it is subject to MTT or another qualifying Income Inclusion Rule for an accounting period,
- no other group member that is subject to such a rule has a controlling interest in it, and
- at least one group member in which it has an ownership interest (or permanent establishment for which it is the main entity) has a top-up amount or additional top-up amount.
Partially owned parent
A member will be a partially-owned parent if:
- it is not a permanent establishment, investment entity, or the ultimate parent,
- it has an ownership interest in another member of a group,
- more than 20% of the ownership interest in its profits are held by persons other than members of the group, and
A partially owned parent will be a responsible member if:
- it is subject to MTT or another qualifying Income Inclusion Rule for an accounting period,
- it is not wholly-owned by another partially owned parent of that group that is subject to such a rule, and
- it has a direct or indirect ownership interest in a member of the group that has a top-up amount (including an additional top-up amount), or it is the main entity of a permanent establishment that has a top-up amount (including an additional top-up amount).
Permanent establishments
A member may be an intermediate parent member or partially-owned parent member where it has a permanent establishment, if the other conditions are met.
An intermediate parent member or partially-owned parent member may also be responsible for a permanent establishment of another member of the group in which it has an ownership interest. This does not apply where the permanent establishment is located in the same territory as the responsible member.
These rules apply for the purposes of identifying responsible members and the members or permanent establishments for which they are responsible. They do not otherwise change the general ownership rules for permanent establishment.
These provisions were amended by FA26. This guidance reflects the current version of the legislation.
Consult FA26 for legislation applicable to prior periods if the retrospection
election does not apply.
Undertaxed Profits Rule
The concept of responsible members applies in the UTPR, but with some modifications in certain circumstances, such as the definition of ‘potentially undertaxed’ (see MTT62210).