MTT15930 - Scope: Safe harbours: Transitional safe harbour: Source of data
Source: gov.uk (2025-08-05)


The figures used in the transitional safe harbour tests are:
- revenue, which is taken from the CbC Report.
- profit (loss) before income tax, which is taken from the CbC Report.
- qualifying income tax expense, which should be taken from the same accounts that were used to prepare the CbC Report for the territory.
- the substance based income exclusion amount, which must be calculated according to the rules required under the full calculation, using the same accounts that were used to prepare the CbC Report for the territory.
The CbC Report must be qualifying.

This is set out in Paragraph 4, Schedule 16 to Finance (No.2) Act 2023.

See MTT15935 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt15935) for the adjustments to be made to these figures.

Meaning of Country-by-Country (CbC) Report

For MTT purposes, a CbC Report is one prepared and filed in accordance with legislation implementing the OECD’s guidance on Country-by-Country Reporting. This is set out in section 251A of Finance (No.2) Act 2023.

Where no legislation requires a CbC Report to be filed by the group for the MTT period, the OECD guidelines themselves may be used for the purpose of a notional CbC Report.

A CbC Report that is prepared only in respect of certain territories in which the group has members will not be considered a CbC Report for MTT purposes.

See IEIM300000 (https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim300000) for guidance on CbC Reporting in the UK.

Group not required to prepare and file a CbC Report – Notional CbC Reports

Generally, the scope of MTT and CbC Reporting (CbCR) is the same. However, in some cases, groups in scope of MTT will not be in scope of CbCR, or will be exempt from CbCR requirements.

Additionally, in other cases, a group will be required to prepare a CbC Report for a different period than the accounting period for MTT purposes. (For example, where the ultimate parent does not produce consolidated financial statements, the MTT period will run to the calendar year by default in accordance with section 251(2) of the Act; there is no equivalent rule in CbCR.)

In these cases, there is no requirement for a group to prepare and file a CbC Report for the MTT accounting period. Instead, for the purposes of completing the test, the group can use the figures that would have appeared in a qualifying CbC Report, had it been required to prepare and file one. In HMRC guidance this is referred to as a ‘notional CbC report’.

Where a notional CbC Report is used, the group will be treated as having prepared and filed a CbC Report. However, it is necessary that the requirements for a CbC Report to be qualifying are met in regard to the notional CbC Report. This means that the information relied on for the purposes of the safe harbour must be prepared on the basis of qualified financial statements.

The figures from the notional CbC Report must be determined according to:
- the CbCR legislation of the ultimate parent, or
- if there is no such legislation, the OECD’s guidance on CbCR.
Only the information pertaining to the test relied on needs to be included in the information return.

Qualifying CbC Report

A CbC Report will be a qualifying CbC Report in respect of a territory if, for that territory, the relevant information relating to that territory is prepared on the basis of qualified financial statements.

This ensures that, where information on some territories in the report is not prepared using qualified financial statements, the group can still qualify for the safe harbour for the other territories.

Relevant information

The ’relevant information’ is the information that pertains to any of the three safe harbour tests. This is the case even if some of that information is not used in the test being relied on by the group. For example, if the simplified effective tax rate test is relied on, it is still necessary for the figure for revenue to be prepared on the basis of qualified financial statements.

Other information in the CbC Report must still be calculated in accordance with the relevant CbCR legislation or OECD guidelines as applicable.

Qualified financial statements

The ‘qualified financial statements’ are either:
- the accounts used to prepare the consolidated financial statements of the group, or
- the financial statements of individual members of the group, provided that the information therein is reliable and maintained in a manner consistent with its use under the applicable accounting standard.
The qualified financial statements must be prepared in accordance with acceptable accounting standards or authorised accounting standards.

The CbC Report will not qualify in respect of a territory if the relevant information for that territory is derived from a combination of these two categories of qualified financial statements.

Where the consolidated financial statements do not include entities for reasons of materiality, the financial accounts of those non-material members are also considered to be qualified financial statements, even if they are not prepared in accordance with an acceptable or authorised accountings standard.

In addition to the qualified financial statements, a group may need to use management accounts to determine amounts that must be allocated from a main entity to a permanent establishment. This will not prevent the relevant information in the CbC Report from being considered to be based on the qualified financial statements.

PPA adjustments

Where statements contain PPA adjustment, an additional condition must be met in order for them to be considered qualified financial statements. See MTT15931 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt15931).

Example

A group prepares and files a CbC Report in accordance with legislation implementing the OECD guidance on CbCR for all of the three territories in which it operates.

The relevant information in the Report relating to Territory A is derived only from the accounts used to prepare the group’s consolidated financial statements.

The relevant information relating to Territory B is derived only from the financial statements of individual members that are prepared in accordance with the acceptable accounting standard used in that territory.

The relevant information relating to Territory C is partly derived from the accounts used to prepare the group’s consolidated financial statements, and partly derived from the separate financial statements of individual members.

The CbC Report is qualifying for Territory A and Territory B because:
- the Report was prepared and filed in according with OECD guidance, and
- the relevant information relating to each of those territories were derived exclusively from one of the two categories of qualified financial statements.
It is not qualifying for Territory C, because a combination of the two categories of qualified financial statements were used to derive the relevant information relating to Territory C.

When determining whether the transitional safe harbour tests are met, the qualifying income tax expense and substance based income exclusion amount must be determined based on:
- the accounts used to prepare the group’s consolidated financial statements, for Territory A, and
- the financial statements of individual members, for Territory B.
Multi-parent groups

For multi-parent groups, the CbC Report must cover all of its constituent groups to be qualifying.

Amendment in Finance Act 2025

Schedule 16, paragraph 4 was amended by FA25. This guidance page reflects the current version of the legislation. Consult FA25 for legislation applicable to prior periods if the retrospection election does not apply (see MTT09490 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt09490)).