MTT61050 - Charging mechanisms: The charge: Attributing top-up amounts to a responsible member

Top-up amounts are determined separately for each member of the group. The member’s top-up amount is then attributed to the responsible members to determine the amount of tax to be charged to each responsible member.

The amount to be attributed to a responsible member is given by multiplying:

  • the top-up amount of the member (the ‘relevant member’)

by

  • the inclusion ratio of the responsible member (see MTT61060).

This is set out in sections 200 and 201 of Finance (No.2) Act 2023.

See MTT31000+ for guidance on determining the top-up tax amount of a member.

Indirectly held interests

It is possible for a responsible member to hold an interest in the relevant member through another responsible member which holds a more direct interest.

In this case, the amount attributable to the responsible member with the more direct interest should be calculated first. That amount is then deducted when determining the amount attributable to the responsible member with the less direct interest.

The amount to be attributed cannot be reduced below nil as a result of the deduction.

This treatment applies in respect of each ownership interest held by the responsible member.

Example

Responsible Member A holds a direct interest in X Ltd of 20%. It also holds an indirect interest of 36% in X Ltd via Responsible Member B. Responsible Member A holds a 60% ownership interest in Responsible Member B, which in turn holds a 60% interest in X Ltd.

The inclusion ratio of Responsible Member A is 0.56. The inclusion ratio of Responsible Member B is 0.6.

For the 2030 period, X Ltd has a top-up amount of 100.

The top-up amount attributable to Responsible Member B is (0.6*100) = 60.

The top-up amount attributable to Responsible Member A in respect of the indirectly-held interest is (0.36*100) = 36. From this is deducted the amount of 60 already attributed to Responsible Member B. This reduces the amount attributable to zero in respect of this ownership interest.

The top-up amount attributable to Responsible Member A in respect of the directly-held interest is (0.2*100) = 20. No reduction is applicable.