Taxes Consolidation Act 1997 section 111AQ

Ultimate parent entity that is a flow-through entity

Section 111AQ addresses the adjustments made to the qualifying income, losses, and covered taxes of an ultimate parent entity that operates as a flow-through entity, to prevent unintended top-up tax charges where the tax burden is borne by the entity's owners rather than the entity itself.

• Where the ultimate parent entity is a flow-through entity, its qualifying income is reduced by amounts attributable to owners who are taxed on that income at or above the minimum tax rate, or where combined taxes paid by the entity and owners are reasonably expected to meet or exceed the minimum rate within 12 months after the fiscal year end.
• Qualifying income is also reduced for amounts allocated to individual owners or exempt entities (such as government bodies, international organisations, non-profits, or pension funds) who are tax resident in the same jurisdiction as the entity and hold ownership interests of 5 per cent or less of its profits and assets.
• A qualifying loss of the flow-through ultimate parent entity is similarly reduced by the portion attributable to owners, except where those owners are not permitted to use the loss against their own taxable income.
• The entity's covered taxes are reduced in the same proportion as the qualifying income reduction, and these rules extend to permanent establishments and tax-transparent entities through which the entity carries on its business.

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