MTT15970 - Scope: Safe harbours: Transitional safe harbour: Particular types of entity
Source: gov.uk (2025-08-05)


The transitional safe harbour applies differently to some types of entity. These rules are generally intended to align the safe harbour tests to the main rules of Multinational Top-up Tax, while ensuring that the safe harbour provides as much simplicity as possible.

This is set out in Paragraphs 10-12, Schedule 16 to Finance (No.2) Act 2023.

Joint venture groups

Joint venture groups, which consists of a joint venture and its subsidiaries, are ring-fenced under the main rules when calculating the ordinary ETR computation. This treatment also applies in the safe harbour.

The entities in a joint venture group will not be included in the CbC Report. Therefore, the requirement to produce a qualified CbC Report does not apply. The figures used must still be derived from qualified financial statements with the figures for revenue and profit (loss) before income tax to be calculated according to the same requirements imposed under CbCR.

Investment entities

Investment entities are generally not included in the safe harbour calculations and are not covered by the safe harbour. This means that the full MTT calculation will need to be made for the investment entity, even if the other entities in the territory qualify for the transitional safe harbour.

However, where all the members of a group with a direct ownership interest in an investment entity are located in the same territory as the investment entity, the investment entity must be included in the calculations and will also be covered by the safe harbour (if one or more of the tests are met).

Ultimate parent that is a flow-through entity

A group cannot elect to the safe harbour for a territory that contains an ultimate parent that is a flow-through entity unless:
- after making adjustments in accordance with section 170, the profits of the ultimate parent would be nil, or
- the adjusted profits of the ultimate parent would be attributed to one of more permanent establishments, and no income or expense of any permanent establishment would be attributed to the ultimate parent in accordance with section 160.
In these cases, the ultimate parent would have no adjusted profits in the main MTT calculation. Because the ultimate parent that is a flow-through entity is stateless for CbCR purposes, there is effectively an alignment between the CbCR and MTT rules in such cases.

Stateless members

Members that are stateless for MTT purposes are not eligible for the safe harbour. See MTT18010 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt18010) for guidance on stateless members.

Deemed distribution tax election

A group cannot elect to the safe harbour for a jurisdiction that contains a member in respect of which a deemed distribution tax election has been made.

Minority owned members

In the main rules, minority owned members are ring fenced, but they are undifferentiated in the CbCR rules. As a simplification, there is no separate treatment of minority owned members for safe harbour purposes. Minority owned members are included in the safe harbour calculations for their territory and are covered by the safe harbour where the entities in the territory have qualified for it altogether.

Entities held for sale

Entities held for sale are included in the MTT calculations under the main rules, but they are not included in the CbC Report.

For the threshold test (see MTT15940 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt15940)), an adjustment is made to the CbCR figures to include the revenue of entities held for sale. Otherwise, no adjustments are made to include the financial results of entities held for sale.

Entities held for sale are covered by the safe harbour when the conditions have met. This is the case regardless of which of the tests have been met by the group.