MTT17070 - Scope: Determining ownership of entities: Calculating percentage ownership interest held by excluded entities
Source: gov.uk (2025-08-05)


When determining whether an entity is a qualifying service entity or a qualifying exempt income entity (see MTT10230 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt10230)), it is necessary to determine the aggregate percentage ownership interest, including direct and indirect interests, that excluded entities hold in the entity.

A different rule is required for these tests because they require that indirect interests are not disregarded if they are held via a chain of qualifying service entities and qualifying exempt income entities. However, the purpose of preventing double counting is the same.

This is set out in Section 245 of Finance (No.2) Act 2023.

Pension services entities

Note that, for the purpose of these tests, a pension services entity is not treated as an excluded entity.

The rule

To determine the percentage ownership interest held in an entity (“A”) by excluded entities:

Step 1: Ignore any indirect interests, except for those held solely through one or more qualifying service entities or qualifying exempt income entities.

Step 2: Where an interest is held by an individual or entity solely through one or more qualifying service entities or qualifying exempt income entities, ignore any direct or indirect interest through which it is held.

The effect of this rule is that, for the purposes of the tests, we look through all ownership interests held by qualifying service entities and qualifying exempt income entities.

The total interests recognised will always add up to 100%.

Example

It is necessary to determine whether A Ltd is a qualifying exempt income entity. For this definition to be met, it must be 85% or more owned by excluded entities.

EE Ltd is an excluded entity that is not a pension services entity.

Z Ltd is not an excluded entity.

QSE Ltd is a qualifying service entity and QEIE Ltd is a qualifying exempt income entity.

Z Ltd has a 15% direct interest in A Ltd. It also has a 10% direct interest in EE Ltd.

EE Ltd has a 100% direct interest in QSE Ltd, which in turn has a 100% direct interest in QEIE Ltd.

QEIE Ltd has an 85% direct interest in A Ltd.

Z Ltd has an 15% direct interest in A Ltd.

Z Ltd also has an 8.5% indirect interest in A Ltd (via its interest in EE Ltd).

EE Ltd has an 85% indirect interest in A Ltd.

QSE Ltd has an 85% indirect interest in A Ltd.

QEIE Ltd has an 85% direct interest in A Ltd.

The indirect interest of Z Ltd is ignored as it is held via EE Ltd, which is neither a qualifying service entity nor a qualifying exempt income entity. Similarly, all indirect interests not listed above are ignored, as they must be held via either Z Ltd or EE Ltd.

EE Ltd holds an 85% indirect interest via QSE Ltd and QEIE Ltd. The indirect interest held by QSE Ltd and the direct interest held by QEIE Ltd are ignored.

The ownership interests recognised are the 85% indirect interest held by EE Ltd and the 15% direct interest held by Z Ltd.

Exactly 85% of the percentage ownership interest in A Ltd is held by excluded entities. The test is therefore met and A Ltd is a qualifying exempt income entity.