Finance (No. 2) Act 2023

Qualified financial statements and basis of calculations

4 (1) For the purposes of this Part of this Schedule “qualified financial statements” of a multinational group means—

(a) the accounts used to prepare the consolidated financial statement of the ultimate parent, or

(b) financial statements of members of the group prepared in accordance with acceptable accounting standards or an authorised accounting standard.

(2) Where a member of a multinational group is not included in consolidated financial statements of any member of the group on a line-by-line basis solely due to size or materiality grounds, the financial accounts of that member that are used for preparation of the group’s country-by-country report are to be regarded as forming part of the qualified financial statements of the group.

(3) For the purposes of establishing whether the tests in paragraphs 7 to 9 are met in relation to members of a multinational group in a territory, the basis for that determination is to be the information derived from qualified financial statements as to—

(a) revenue,

(b) profit (loss) before income tax, and

(c) qualifying income tax expense (see paragraph 5).

(4) Information derived from qualified financial statements as to revenue or profit (loss) before income tax must be adjusted—

(a) as the information was adjusted for the purposes of its inclusion in a qualifying country-by-country report in relation to the territory, or

(b) if the information was not included in such a report, as it would have been adjusted had it been included in such a report.

See also paragraph 6 which provides for circumstances in which further adjustments are required to profit (loss) before income tax and circumstances in which adjustments are required to qualifying income tax expense.

(5) The information described in sub-paragraph (3)(a) to (c) that must be used to determine whether the tests in paragraphs 7 to 9 are met in relation to members of a multinational group in a territory must be derived from whichever of the following was used to prepare the qualifying country-by-country report in relation to the territory—

(a) qualified financial statements falling within sub-paragraph (1)(a), along with any financial accounts treated as qualified financial statements as a result of sub-paragraph (2), or

(b) qualified financial statements falling within sub-paragraph (1)(b), along with any financial accounts treated as qualified financial statements as a result of sub-paragraph (2).

(6) Where that information in respect of a territory is not available in qualified financial statements of a multinational group, no election may be made in respect of that territory.