MTT21420 - Calculating the effective tax rate: Adjusted profits: Marketable transferable tax credits
Source: gov.uk (2025-08-05)


Some tax credits may be transferable to other persons, unlike an ordinary tax credit which is only creditable against tax for the recipient of the credit. A person disposing of such a tax credit will typically receive payment for the tax credit. Such tax credits may therefore have the economic character of government grants or refundable tax credits.

These transferable tax credits are subject to adjustments for MTT purposes.

Where a transferable tax credit is also determined to be marketable, the member holding the tax credit may need to make adjustments for MTT purposes on the receipt, transfer, use, or expiration of the tax credit (see MTT21430 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt21430)).

This is set out in section 148A of Finance (No.2) Act 2023.

Where a transferable tax credit is non-marketable, an adjustment may be required either to the covered tax balance (see MTT25400 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt25400)) or the adjusted profits (see MTT21440 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt21440)).

Transferable tax credits

A tax credit is a ‘transferable tax credit’ if it meets the transferability condition. This condition differs depending on whether the credit is held by the original recipient of the credit or a purchaser of the credit.

For the person who was originally granted the credit (the ‘originator’), the transferability condition is met if:
- the type of credit may, under the law of the territory granting the credit, be transferred to an unconnected person or entity within 15 months of the end of the accounting period in which it was granted.
For a person who has acquired the credit (a ‘purchaser’), the condition is met if:
- the credit may, under the law of the territory granting the credit, be legally transferred to an unconnected person under the same or similar legal conditions that would apply to the originator, and before the end of the accounting period in which it was transferred to the purchaser.
Qualifying refundable tax credits

If a transferable tax credit is also a qualifying refundable tax credit, it will not be treated as a transferable tax credit. It will only be a qualifying refundable tax credit.

See MTT21410 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt21410) for guidance on qualifying refundable tax credits.

Marketable transferable tax credits

A transferable tax credit is ‘marketable’ if the marketable condition is met. This condition also differs depending on whether it is held by the originator or a purchaser.

For the originator, the condition is met if:
- the credit is transferred to an unconnected person or entity within 15 months of the end of the accounting period in which the credit was granted, and it is sold at a price of at least 80% of its net present value, or
- the credit is not actually transferred, but similar credits are traded between unconnected persons or entities within 15 months of the end of the accounting period in which the credit was granted, and are typically traded at a price of at least 80% of their net present value.
For a purchaser, the condition is met if:
- the credit was acquired from an unconnected person or entity at a price of at least 80% of its net present value.
Net present value of a tax credit

When determining the net present value of a tax credit for this purpose:
- it is to be assumed that the entity that holds the credit is able to use it before it expires.
- the discount rate is to be determined by reference to the return on debt instruments issued by the government of the territory in which the credit was granted.