Taxes Consolidation Act 1997 section 111AH

Minority owned constituent entities

Section 111AH sets out special rules for calculating the effective tax rate (ETR) and top-up tax for minority-owned constituent entities within MNE groups or large-scale domestic groups.

• A minority-owned constituent entity is one in which the ultimate parent entity (UPE) holds 30% or less of the ownership interests, or has no ownership interest at all — it is still a constituent entity because the UPE holds controlling interests despite the small ownership percentage.
• Where minority-owned entities form a subgroup (i.e. one controls another), the ETR and top-up tax for that subgroup are calculated as if it were a separate MNE group or large-scale domestic group, and its taxes and income are excluded from the main group's jurisdictional calculations.
• A standalone minority-owned entity (not part of a subgroup) has its ETR and top-up tax calculated on an individual entity basis, and its figures are likewise excluded from the main group's calculations — unless it is an investment entity.
• These special rules prevent the blending of income and taxes of differently owned entities in the same jurisdiction, which could otherwise cause top-up tax charges to fall partly on non-group owners of unrelated entities.

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