Finance (No. 2) Act 2023

154 Exclusion of qualifying intra-group financing arrangement expenses

(1) Where—

(a) the underlying profits of the member of a multinational group for an accounting period reflect expenses attributable to a qualifying intra-group financing arrangement that could be reasonably expected, over the expected duration of the arrangement, to—

(i) increase the amount of expenses taken into account in calculating the member’s underlying profits, and

(ii) not result in a corresponding increase in the taxable income of a member of the group that is a high tax member for that period,

(b) the member is a low tax member for that period, and

(c) the expenses are not required to be included as a result of section 155,

the member’s underlying profits for that period are to be adjusted to exclude those expenses.

(2) In this section—

• “intra-group financing arrangement” means an arrangement between two or more members of a multinational group under which a member (member A) directly or indirectly provides credit or otherwise makes an investment in another member (member B);

• an intra-group financing arrangement is “qualifying” if member A is a high tax member and member B is a low tax member;

• a member of a multinational group is a “low tax member” in an accounting period if the effective tax rate for the standard members of the group located in the member’s territory for that period would, ignoring intra-group financing arrangements, be less than 15%;

• a member of a multinational group is a “high tax member” in an accounting period if the effective tax rate for the standard members of the group located in the member’s territory would, ignoring intra-group financing arrangements, be 15% or more.