MTT62210 - Charging mechanisms: Undertaxed Profits Rule: Determining untaxed amounts of a member
Source: gov.uk (2025-08-05)


There is a two-step process for determining whether the top-up amounts (including additional top-up amounts) of a particular member of a group are chargeable under the UTPR:

Step 1– Determine whether the member is “potentially undertaxed”, in accordance with section 229A of Finance (No.2) Act 2023. A member will be potentially undertaxed if not all of its top-up amount will be collected by the Income Inclusion Rule (IIR, the primary charging mechanism).

Step 2– If the member is potentially undertaxed, the untaxed amount for the member is (in accordance with section 229B of the Act):
- the top-up amount of the member,
less
- the total amount of the top-up amount of the member that has been attributed to responsible members (see MTT61040 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt61040)).
Where this is nil, the top-up amount of the member has been fully attributed to responsible members and so there is no untaxed amount.

Where the top-up amounts allocated to responsible members equal or exceed the top-up amount of the member, then there will be no untaxed amount to be charged under the UTPR – see section 229B of Finance (No.2) Act 2023.

These steps must be applied to each member of the group which has a top-up amount. Where any member of the group has an untaxed amount, the group will be subject to the UTPR and will be chargeable to MTT on the untaxed amount.

Potentially undertaxed

A member will be potentially undertaxed unless the entirety of its ownership interests which are held directly or indirectly by the ultimate parent are subject to an IIR. This includes both the primary charging mechanisms of MTT, or a foreign equivalent.

A member is potentially undertaxed if it meets one of the following conditions (subject to two exceptions):
- it is the ultimate parent of the group
- it is located in the same territory as the ultimate parent
- the ultimate parent is not a responsible member (see MTT61030 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt61030))
Where a member meets these criteria and the exception does not apply, it is potentially undertaxed.

The exception will apply if:
- the ultimate parent is not a responsible member,
- the ultimate parent has no direct ownership interests in the member, and
- the indirect ownership interests the ultimate parent has in the member are all held through ownership interests in a responsible member.
This ensures that the member is not potentially undertaxed where all of its top-up amount will be charged to a responsible member under an IIR or Domestic IIR.

For the purpose of determining the untaxed and potentially untaxed, a responsible member is not to be regarded as a responsible member if:
- it is located in the same territory as the member under consideration, and
- that territory does not apply a Domestic IIR (see MTT62410 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt62410)).
Member located in territory with a Domestic IIR

Where a member is located in a territory with a Domestic IIR, the definition of responsible member is modified.

Also, an additional exception may apply when a potentially undertaxed member is located in a territory with a Domestic IIR.

See MTT62410 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt62410) for further guidance.

Joint venture groups

There are different provisions for determining whether members of a joint venture group are undertaxed and if they have an untaxed amount for UTPR. See MTT62120 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt62120) for further guidance.