HMRC has published internal guidance on the UK’s Multinational and Domestic Top-up Taxes, aligned with the OECD’s Pillar Two rules.
UK’s tax, payments and customs authority (HMRC) published its Internal Manual on the Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT) on 5 August 2025.
MTT is the UK’s tax which implements the Income Inclusion Rule and Undertaxed Profits Rule, known widely the GloBE rules, outlined in the OECD’s Pillar Two Model Rules. DTT is the Qualifying Domestic Minimum Top-up Tax (QDMTT) implemented by the UK. It applies the main Pillar Two rules to UK entities.
The manual includes the following sections: MTT00100 About this manual, MTT01000 Introduction, MTT09000 Miscellaneous pages, MTT09900 Reference materials, MTT10000 Scope, MTT20000 Calculating the effective tax rate, MTT30000 Calculating top-up amounts, MTT40000 Particular entities and adjustments, MTT50000 Administration, and MTT60000 Charging mechanisms.
MTT20100 – Calculating the effective tax rate: The effective tax rate
To determine the effective tax rate (ETR) of the members of a group in a territory for a period, the following process is to be followed.
Step 1: Determine the adjusted profits of each member of the group located in that territory for that period (see MTT21000+).
Step 2: Subtract the sum of any losses made in the period from the sum of any profits made by the members of the group located in the same territory for that period. If the outcome of this step is nil or less, the ETR is to be treated as being 15%.
Step 3: Determine the covered tax balance for all of the members of the group in that territory (see MTT25000+).
If the aggregate covered tax balance is nil, the ETR will be 0%.
Step 4: Divide the aggregate covered tax balance (the outcome of the third step) by the net adjusted profits (the outcome of the second step).
The ETR will be this figure, expressed as a percentage. This is set out in Section 132 of Finance (No.2) Act 2023.
Standard members
The ETR of investment entities (see MTT45110) and minority owned members (see MTT41520) are calculated separately to the other members of a group in a territory.
The legislation uses the term ‘standard member’ to denote that the calculation is to be performed separately for standard members, investment entities, and minority owned subgroups. See MTT41510 for further guidance.
Joint venture groups
Members of a joint venture group are treated as being in a different group for the purpose of determining the ETR. See MTT41600+ for further guidance.
Stateless members
A stateless member of the group is treated as the sole member of the group located in a nominal territory. This will be separate to the nominal territory of any other stateless member of the same group. See MTT18010 for further guidance.
Domestic Top-up Tax – single entities
The ETR of a qualifying entity that is not a member of a group is determined by the same process as the process for calculating the ETR of a member of a group for MTT. However, there is no need to aggregate profits with the losses of the other members of the territory, as there will not be any other members.
Earlier, UK HMRC updated its guidance on How to prepare for the Multinational Top-up Tax and the Domestic Top-up Tax on 9 June 2025.
This follows after the HMRC launched a public consultation on the supplementary draft guidance regarding the multinational and domestic top-up tax on 28 January 2025.
