(1)This section applies to accounting periods commencing on or before 31 December 2025 that end on or before 30 June 2027.
(2)Subsection (3) applies where—
(a)a member of a multinational group (“C”) is subject to a blended CFC regime in an accounting period (“the relevant period”),
(b)C has an ownership interest in an entity (“F”) that is a blended CFC entity in relation to C, and
(c)the blended CFC allocation key of F is greater than nil.
(3)The appropriate proportion of tax charged to C under that regime (after all deductions and use of any losses) is—
(a)where F is a member of the same multinational group as C, to be allocated to F, or
(b)where F is not a member of that group, to be excluded from the covered tax balance of C.
(4)The appropriate proportion is the proportion given by dividing the blended CFC allocation key for F for the relevant period by the sum of all blended CFC allocation keys for that period of blended CFC entities in which C has an ownership interest.
(5)The blended CFC allocation key for the relevant period of a blended CFC entity that C has an ownership interest in is the amount given by multiplying—
(a)the attributable income of C, by
(b)the percentage given by subtracting the applicable effective tax rate of the blended CFC entity for the relevant period from the applicable CFC rate for that period.
(6)But where—
(a)the result of subsection (5)(b) in relation to a blended CFC entity is less than nil, or
(b)the applicable effective tax rate of that entity is greater than 15%,
the blended CFC allocation key for that entity is to be treated as nil.
(7)The attributable income of C means C’s share of the income of F for the relevant period determined as it would be determined for the purposes of the blended CFC regime.
(8)The applicable effective tax rate of a blended CFC entity for the relevant period is—
(a)where it is located in a territory in which the effective tax rate of members of the multinational group of which C is a member is calculated for that period, that effective tax rate as it would be calculated if—
(i)any tax arising under a blended CFC regime were ignored, and
(ii)where the blended CFC regime permits foreign tax credit in respect of a qualifying domestic top-up tax on the same basis it would be permitted for covered taxes, that qualifying domestic top-up tax were a covered tax, or
(b)where it is not located in such a territory, the effective tax rate that would be calculated for the relevant period for the blended CFC entities located in that territory in which C has an ownership interest if—
(i)those entities were members of a multinational group whose ultimate parent’s accounting period is the same as the relevant period,
(ii)the consolidated financial accounts of that ultimate parent represented the aggregate income and taxes shown in the financial accounts of those companies,
(iii)any tax arising under a blended CFC regime were ignored, and
(iv)where the blended CFC regime permits foreign tax credit in respect of a qualifying domestic top-up tax on the same basis it would be permitted for covered taxes, that qualifying domestic top-up tax were a covered tax.
(9)The applicable CFC rate for the relevant period means the rate which reflects the threshold for low taxation by reference to which the blended CFC regime is generally operated, taking into account any credit for foreign taxes available under the regime.
(10)In this section “blended CFC entity” in relation to a member of a multinational group subject to a blended CFC regime means—
(a)a controlled foreign company in relation to that member,
(b)a permanent establishment of such a controlled foreign company,
(c)an entity whose profits are treated, for the purposes of the regime, as the profits of such a controlled foreign company.