Multinational Top-up Tax and Domestic Top-up Tax

MTT62420 - Charging mechanisms: Undertaxed Profits Rule: Miscellaneous definitions: Meaning of 'appropriate financial statements'

The guidance on the ‘full time equivalent employee number’ and the ‘value of tangible fixed assets’ both refer to 'appropriate financial statements'. This is wider than the concept of financial statements elsewhere in the Multinational Top-up Tax rules.

The main requirement for financial statements to be 'appropriate' is that they are prepared on a consistent basis for all members of the group. This is to ensure that the UTPR allocation key allocates all of the untaxed amounts of the group, with no disagreement between jursidictions about the numerator or denominator of the allocation key. 

A group may wish to rely on the figures included in the financial statements used elsewhere in its MTT calculations for the UTPR allocation. The concept of 'appropriate financial statements' is also wide enough to allow values from a valid Country-by Country Report to be used, provided these are derived in turn from the financial statements of the group and meet the conditions set out in MTT62340 and MTT62350.

This is set out subsections 229G(4) and 229H(2) of Finance (No. 2) Act 2023.