MTT49020 - Particular entities and adjustments: Transitional provisions: Intra-group transfers before entry into regime
Source: gov.uk (2025-08-05)


A targeted anti-avoidance rule applies to prevent an increase to the carrying value of an asset being recognised for MTT purposes, where that increase arises as a result of an intra-group transfer made before MTT or other equivalent taxes apply to the transferor.

Deferred tax assets relating to the transferred asset may be limited.

The rule is set out in paragraph 2, Schedule 16 of Finance (No.2) Act 2023.

Conditions
- an asset is transferred between two members of a group in an accounting period
- the transferor was not subject to MTT or a foreign equivalent in that period
- the transferor was not subject to a qualifying domestic top-up tax in that period
- the transfer took place on or after 1 December 2021
- the asset is not manufactured, and is not of a type sold, in the course of carrying on a trade by either the transferor or transferee
Meaning of ‘subject to MTT or a foreign equivalent’

When determining whether the transferor was subject to MTT or a foreign equivalent, it is not considered subject to MTT for the purpose of this rule solely because another member of the group in the same territory is subject to the tax. This can happen in the case of intermediate parent members, which may be the responsible member for only some of the members of the group in the member’s territory. See MTT61030 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt61030) for guidance on responsible members.

Additionally, a member will not be considered to be subject to MTT if the QDMTT safe harbour (see MTT15100 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt15100)+) applies to it.

Effect

Where the rule applies:
- the value of the asset is treated for MTT purposes as being the carrying value of the assets in the hands of the transferor immediately prior to the transfer, and
- any deferred tax asset arising in relation to the assets in the underlying profits of the transferee is limited to the lesser of:
- the cap amount, and
- the value of deferred tax assets that arose in relation to the assets before their transfer and the tax paid amount.
Additionally, where the relevant time is later than the date of the transfer (i.e., when the transferee first becomes subject to MTT or a foreign equivalent):
- the value of the assets at the relevant time is to be adjusted to reflect:
- capitalised expenditure incurred from the date of transfer to the relevant time, and
- amortisation and depreciation of the assets, determined as they would have been by the transferor using the accounting policies and rates that were previously used, and
- the tax paid amount and the value of deferred tax assets arising in relation to the asset are adjusted accordingly.
Relevant time

The ‘relevant time’ is the later of:
- the date of the transfer, and
- the commencement of the first period in which the transferee is subject to MTT or a foreign equivalent.
Value of deferred tax assets

When determining the value of deferred tax assets arising in relation to the asset:
- if the rate of tax in relation to the asset exceeds 15%, it is to be valued as though the rate had been 15%, and
- exclude the impact of any valuation adjustments or accounting recognition adjustments.
Tax paid amount

The tax paid amount is the sum of:
- the amount of tax expense of the transferor in relation to the transfer of assets that relates to covered taxes, and
- the amounts of qualifying current tax expense relating to the transfer of assets that would have been allocated to the transferor as a result of section 177 or 179 (see MTT41040 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt41040) and MTT25500 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt25500) respectively), assuming that:
- the ultimate parent had been located in the UK and period of transfer had commenced on or after 31 December 2023 (i.e., the whole group was subject to MTT for the period), and
- the restriction in section 179(2) on the allocation of mobile income were ignored.
When determining the tax expense of the transferor:
- where a loss arising in the period of transfer is offset against a taxable gain arising on the transfer, ignore that offsetting, and
- exclude the impact of any valuation adjustments or accounting recognition adjustments.
Cap amount

The cap amount is the amount given by:
- dividing:
- the amount of tax expense of the transferor in relation to the transfer of assets that relates to covered taxes, by
- the nominal rate of tax to which the expense relates, and
- multiplying the result of that division by 15%.
This means the cap amount is 15% of the value of the asset grossed up from the tax expense paid by the transferor on the asset.

Election to disapply the rule

Where the cap amount is exceeded by the sum of:
- the tax paid amount, and
- the value of deferred tax assets that arose in relation to the assets before their transfer,
the group may elect that the rule to be disapplied.

This is an annual election that is made in respect of a transfer. See MTT52200 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt52200) for guidance on making elections.

Meaning of ‘transfer of assets’

For the purpose of this rule, a ‘transfer of assets’ includes a transaction relating to assets that does not result in a change in their ownership, if the transaction has a similar effect for accounting purposes to a change in ownership of the assets.

Series of transfers

Where there are a series of intra-group transfers, and each of those transfers meet the conditions of this rule, that series of transfers is treated as a single transfer.

In such a case:
- the value of the asset is to be treated as the carrying value of the asset in the hands of the transferor in the first transfer of the series,
- the cap amounts, tax paid amounts, and value of deferred tax assets are to be aggregated,
- the ‘date of transfer’ when determining the relevant time is the date of the last transfer in the series, and
- the ‘transferee’ when determining the relevant time is the transferee in the last transfer of the series.