MTT11020 - Scope: Revenue threshold test: Effect of mergers and de-mergers
Source: gov.uk (2025-08-05)


The revenue threshold test applies to the four accounting periods preceding the period being tested (the ‘qualifying period’). The entities that constitute the group may be different in those prior periods (the ‘testing period’), or the qualifying period, as a result of a merger or demerger.

Special rules are required in such cases to ensure that the revenue threshold test applies correctly.

This is set out in section 130 and 131 of Finance (No.2) Act 2023.

Domestic Top-up Tax

When determining whether the revenue threshold is met for DTT purposes, the guidance on this page applies in the same way that it applies for MTT purposes. However, where a single entity may be in scope of DTT, these rules will not apply.

See MTT11030 (https://www.gov.uk/hmrc-internal-manuals/multinational-top-up-tax-and-domestic-top-up-tax/mtt11030) for further guidance on the revenue threshold test under DTT.

Member acquired that was not a member of another consolidated group in the testing period

Where an entity:
- is a member of the group in the qualifying period, but
- was not a member of any consolidated group in a period in the testing period,
its revenue will be included in the revenue of the group for the period in the testing period, for the purpose of the revenue threshold test.

The figure for its revenue in that period will be determined using its financial statements or any consolidated financial statements that includes its revenue. An apportionment on a just and reasonable basis may be required to align the figures in these statements with the group’s accounting periods.

This scenario includes cases where the group was created as the result of the acquisition of a single entity by another single entity.

Example

A Ltd and B Ltd are individual companies that have never been part of any consolidated group. On 1 January 2030, A Ltd acquired B Ltd, thus forming AB group. A Ltd produces consolidated financial statements with accounting periods ending on 31 December.

It is necessary to determine whether the group qualifies for MTT for the period ending 31 December 2030 (the ‘qualifying period’).

The revenue threshold test will apply to the four periods preceding the qualifying period, covering 2026 to 2029. For these periods, the revenue of A Ltd and B Ltd will be added together to assess whether the threshold has been met in those periods.

On 1 January 2035, A Ltd acquires X Ltd. X Ltd had been a member of a consolidated group after being acquired by UPE Ltd on 1 July 2033, but was not a member of any consolidated group prior to that.

When determining whether AB group is qualifying for the 2035 period, the revenue of X Ltd will be included for the periods ending in 2031 and 2032 only, because X Ltd was a member of a consolidated group in the periods ending in 2033 and 2034.

Merger between two or more consolidated groups

If there is a merger between consolidated groups, the revenues of each of the consolidated group are to be included in the revenue threshold test for the merged group.

The revenue of each consolidated group is determined by the consolidated financial statements of its ultimate parent, and should be apportioned on a just and reasonable basis to the accounting period of the merged group.

For this purpose, a ‘merger’ is any arrangement that results in all, or substantially all, of the members of two or more consolidated groups becoming members of a single consolidated group.

Demerged groups

If a multinational group demerges into two or more separate consolidated groups, and:
- in two of the four periods preceding the period of demerger, it had revenue exceeding €750m,
- Pillar 2 rules applied to a member of the group for the period of demerger, and
- for the period of demerger, Pillar 2 rules applied to the group,
special rules will apply when determining whether each of the demerged groups meet the revenue threshold test in the four periods ending after the demerger. These rules apply instead of the two-of-four-years provision.

The demerged group will pass the revenue threshold test if it exceeds the revenue threshold in the first period ending after the demerger.

In the three subsequent periods (the second to fourth periods ending after the demerger), the demerged group will pass the revenue threshold test if it exceeds the revenue threshold in any two of the periods ending after the demerger, up to and including the qualifying period.

Example

Group XYZ is created as the result of a demerger. Its accounting periods run to 31 December and its first accounting period begins on 1 January 2040.

Its revenue for the four periods ending after the demerger are as follows:

Period

Group revenue (from consolidated statements)

2040

€800m

2041

€700m

2042

€780m

2043

€740m

For the 2040 period, the revenue exceeds the threshold of €750m, so the test is met for this period.

For the 2041 period, it is necessary for the threshold to be met in two of the periods ending after the demerger, up to and including the 2041 period. The threshold is met in the 2040 period but not the 2041 period. Therefore, the group is not qualifying for the 2041 period.

For the 2042 and 2043 periods, the threshold is met in two of the periods (the 2040 and 2042 periods). Therefore, the group is qualifying for the 2042 and 2043 periods.

The normal rules will apply when testing the 2044 period and subsequent periods.