MTT10210 - Scope: Excluded entities: Overview
Source: gov.uk (2025-08-05)


Entities that meet the criteria to be an excluded entity are treated as not being members of the multinational group. They will not be chargeable members and will not be included in the MTT calculations.

The revenue of an excluded entity is still included when determining whether the revenue threshold has been met (see MTT11010 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt11010)).

Entities are excluded if they are:
- non-profit organisations,
- qualifying non-profit subsidiaries,
- qualifying service entities,
- qualifying exempt income entities.
- governmental entities,
- international organisations, or
- pension funds.
See MTT10220 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10220) for guidance on the definitions of non-profit organisation and qualifying non-profit subsidiary.

See MTT10230 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10230) for guidance on the definitions of qualifying service entity and qualifying exempt income entity.

See MTT10240 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10240) for guidance on the definitions of governmental entity and international organisation.

See MTT10250 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10250) for guidance on the definitions of pension fund and pension service entity.

This is set out in section 127 of Finance (No.2) Act 2023.

Entities excluded when they are the ultimate parent

The following entities are excluded only if they are the ultimate parent of a group:
- investment funds
- REITs (including UK REITs and overseas REIT equivalents)
These entities are also excluded if they would be an ultimate parent but are not, for the sole reason that they do not produce consolidated financial statements.

See MTT10260 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10260) for guidance on the definitions of investment fund and REIT.

Entities excluded despite not being a member of a group

It is not a requirement for an entity to be a member of a group for it to be an excluded entity. This may be significant in cases where an excluded entity that is not a member of a group has a subsidiary which is a member of the group that may be excluded as a qualifying service entity or qualifying exempt income entity (see MTT10230 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10230)).

Example

X Ltd is an investment fund that would be the ultimate parent of a group but is not for the sole reason that it does not produce consolidated financial statements. It is therefore an excluded entity.

The deemed consolidated financial statement provision in paragraph 249(1)(d) does not apply to X Ltd because, according to subsection 249(2), an authorised accounting standard does not permit it to consolidate entities. Consequently, X Ltd is not part of any group.

X Ltd holds a 10% minority interest in A2 Ltd, which is 90% owned by another excluded entity, A Ltd. A2 Ltd is a member of a consolidated group. The activities of A2 Ltd consist entirely of activities ancillary to the activities of its two owners.

A2 Ltd will be excluded as a qualifying service entity, because X Ltd is an excluded entity despite not being a member of any group. Its minority interest therefore counts towards the 95% threshold in the criteria for qualifying service entities.

Election for an entity not to be excluded

A group can elect for a member of a group that is a qualifying non-profit subsidiary, a qualifying service entity, or a qualifying exempt income entity to not be an excluded entity.

This allows a group to choose to be subject to MTT (or a foreign qualifying IIR) in their preferred territory.

This election is a long term election. See MTT52200 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt52200) for guidance on making elections.

Excluded entity is an ultimate parent

An entity will still be the ultimate parent of a group even if it is an excluded entity.

Differences with Domestic Top-up Tax

Entities that are excluded for MTT purposes will also be excluded for DTT purposes. However, there are differences in the treatment of excluded entities, and some entities are only excluded for DTT purposes. See MTT10030 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10030) for guidance on excluded entities under DTT.