# Finance Act 2026, Paragraph 12: Adjustments for ultimate parent that is a flow-through entity

Extent: E+W+S+N.I.

(1) Section 170 (adjustments for ultimate parent that is a flow-through entity) is amended as follows.
(2) In subsection (1), in the words after paragraph (b), for “its profits” substitute “those profits”.
(3) In subsection (2)—
(a) in the words before paragraph (a), for “profits” substitute “those profits”;
(b) in paragraph (a), for “the ultimate parent’s profits” substitute “those profits”.
(4) For subsection (2A) substitute—
“(2A) For the purposes of this section—
(a) each holder of a direct ownership interest in the ultimate parent is treated as entitled as a result of that interest to a proportion of the ultimate parent’s adjusted profits (that is to say, its adjusted profits ignoring this section), and
(b) the proportion of those adjusted profits to which each holder is treated as entitled is the proportion of those profits to which it would have been entitled had the actual amount of profits accruing to the ultimate parent been equal to its adjusted profits.”
(5) In subsection (3), in the words before paragraph (a), for “of the group” substitute “mentioned in subsection (1)(b)”.
(6) After subsection (5) insert—
“(5A) Subsections (5B) and (5C) apply where—
(a) the holder of the ownership interest is not subject to tax on an amount of the ultimate parent’s profits for a taxable period that ends within 12 months of the accounting period mentioned in subsection (1)(b), and
(b) the holder would be subject to tax on the amount for a taxable period ending within that 12-month period but for a difference which will be eliminated over time between—
(i) the time when any income, expense, gain or loss is recognised in the ultimate parent’s financial statements, and
(ii) the time when that income, expense, gain or loss is reflected in the profits of the ultimate parent on which the holder is subject to tax (“the holder’s taxable profits”).
(5B) Condition A has effect, for each accounting period up to and including the period in which that timing difference is eliminated, as if the income, expense, gain or loss were instead reflected in the holder’s taxable profits in the taxable period in which it is recognised in the ultimate parent’s financial statements.
(5C) In a period for which, under subsection (5B), the holder’s taxable profits of a particular type are treated for the purposes of condition A as greater or less than what they actually are, it is to be assumed—
(a) that any excess is subject to tax at the same nominal rate at which the holder’s taxable profits of that type are actually subject to tax,
(b) that the holder pays tax on any excess at that rate,
(c) that any shortfall is not subject to tax, and
(d) that the holder pays no tax on any shortfall.”

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Source: https://www.legislation.gov.uk/ukpga/2026/11/schedule/8/paragraph/12 (the official version)
Page: https://openlegislation.uk/finance-act-2026/schedule-8/paragraph-12
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.