Commentary: Multinational Top-up Tax in Part 3 of the Finance (No.2) Act 2023

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Part 3 is the starting point for the UK’s implementation of the Global Anti-Base Erosion Rules of Pillar Two. The Multinational Top-up Tax is the UK’s implementation of the Income Inclusion Rule. At the time of its enactment, discussions on tweaks to the Pillar Two rules were still ongoing at the international level (and are, indeed, still ongoing). So, Part 3 includes a time-limited power (until 31 December 2026) to amend the legislation by regulations in anticipation of changes being required to align the legislation with the Pillar Two rules to ensure consistency.

The commentary seeks to navigate Part 3, as originally enacted, sign-posting relevant definitions and the connections between the sections. Where helpful, the corresponding parts of the OECD’s Model Rules, Commentary and the first tranche of the Administrative Guidance are referred to. The draft HMRC guidance published on 15 June 2023 is also referenced.

Materials published following the enactment of Finance (No. 2) Act 2023 (including the second tranche of OECD Administrative Guidance and draft legislation for inclusion in further Finance Bills which would amend Part 3, including to implement the Undertaxed Profits Rule and additional safe harbours) are not dealt with in the commentary.


This commentary was originally published in the Finance Act Handbook 2023 published by Tolley.


Please download the publication to read the full commentary.