MTT15120 - Scope: Safe harbours: QDMTT safe harbour: The election
Source: gov.uk (2025-08-05)


The group must make an election to access the QDMTT safe harbour for a territory. This is an annual election (see MTT52200 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt52200)), and it is made in respect of all the members of a group located in a territory.

The election can only be made if the following conditions are met for the territory for the period:
- an accredited qualifying domestic top-up tax applies in that territory, and
- none of the four disqualifying conditions apply.
Where a disqualifying condition applies, the group may not make the election at all for the relevant territory.

This is set out in Chapter 1, paragraph 3 of Schedule 16A to Finance (No.2) Act 2023.

The election is made separately for joint venture groups and non-standard members (investment entities and minority owned members). Different conditions apply for the elections in respect of those members (see MTT15130 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt15130)).

Effect of an election

Where a QDMTT safe harbour election is made, all the members in the relevant territory are treated as not having top-up amounts or additional top-up amounts for MTT purposes.

Note that the election is made separately for joint venture groups and non-standard members (see MTT15130 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt15130)).

Disqualifying condition A – flow-through entity that is an ultimate parent not chargeable to the QDMTT

This disqualifying condition is met if:
- the ultimate parent is located in the territory,
- the ultimate parent is a flow-through entity, and
- the QDMTT that applies in that territory:
- does not generally impose a charge on the ultimate parent due to it being a flow-through entity, and
- does not impose a charge on the ultimate parent in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.
Disqualifying condition B – flow-through entity that is a responsible member not chargeable to the QDMTT

This disqualifying condition is met if:
- a responsible member of the group (see MTT61030 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt61030)) is located in the territory,
- the member is not the ultimate parent of the group,
- the member is a flow-through entity (see MTT41410 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt41410)), and
- the QDMTT applying in the territory:
- does not generally impose a charge on the member due to it being a flow-through entity, and
- does not impose a charge on the member in circumstances where there would otherwise be an amount of tax that was not charged to any member of the group in that territory.
Conditions A and B exist because a QDMTT may be accredited for the safe harbour even though it does not impose a charge on flow-through entities (even where this would result in an amount of tax not being charged at all). The conditions “switch off” the safe harbour for groups where this outcome may arise.

Note that the part of the condition that relates to the design of the QDMTT does not depend on the particular facts relating to the group. Even if a charge is in fact imposed on another entity in respect of the flow-through entity, the disqualifying condition will still be met if the QDMTT does not impose a charge on a flow-through entity as a last resort.

Disqualifying condition C – groups in initial phase of international expansion not subject to the QDMTT

This disqualifying condition is met if:
- the QDMTT applying in the territory provides that it does not apply to a multinational group in the initial phase of international expansion,
- that provision is not limited in application to circumstances where the members of a multinational group in the territory are not subject to Pillar Two rules, and
- the provision applies to the group.
This condition exists because a QDMTT may still be accredited for safe harbour purposes where it contains the provision described. The condition works to “switch off” the safe harbour for groups that benefit from such a provision.

The provision envisaged by this rule is an extension of Article 9.3 of the OECD Model Rules in the design of a QDMTT.

Disqualifying condition D – enforceability of QDMTT amount in question

This disqualifying condition is met if the enforceability of an amount of QDMTT accruing to a standard member of the group is in question.

See MTT31020 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt31020) for guidance on how to determine whether the enforceability of an amount of QDMTT is in question.