{
  "url": "https://openlegislation.uk/finance-no-2-act-2023/schedule-16/paragraph-4",
  "json_url": "https://openlegislation.uk/finance-no-2-act-2023/schedule-16/paragraph-4.json",
  "legislation": "ukpga/2023/30",
  "legislation_title": "Finance (No. 2) Act 2023",
  "legislation_url": "https://openlegislation.uk/finance-no-2-act-2023",
  "path": "schedule/16/paragraph/4",
  "kind": "paragraph",
  "number": "4",
  "heading": "Qualified financial statements and basis of calculations",
  "text": "(1) For the purposes of this Part of this Schedule “qualified financial statements” of a multinational group means—\n(a) the accounts used to prepare the consolidated financial statements of the ultimate parent provided the statements are prepared in accordance with acceptable accounting standards or an authorised accounting standard, or\n(b) financial statements of members of the group provided—\n(i) they are prepared in accordance with acceptable accounting standards or an authorised accounting standard, and\n(ii) the information contained in those statements is reliable and is maintained in a manner that is consistent with its use under the accounting standard used in preparing those statements.\n(1A) But see also paragraph 4A in cases where those accounts or statements reflect purchase price accounting adjustments.\n(2) Where a member of a multinational group is not included in consolidated financial statements of any member of the group on a line-by-line basis solely due to size or materiality grounds, the financial accounts of that member that are used for preparation of the group’s country-by-country report are to be regarded as forming part of the qualified financial statements of the group.\n(3) For the purposes of establishing whether the tests in paragraphs 7 to 9 are met in relation to members of a multinational group in a territory, the basis for that determination is to be the information derived from qualified financial statements as to—\n(a) revenue,\n(b) profit (loss) before income tax, ...\n(c) qualifying income tax expense (see paragraph 5) , and\n(d) qualified substance based income exclusion amount (see paragraph 9(2)).\n(4) Information derived from qualified financial statements as to revenue or profit (loss) before income tax must be adjusted—\n(a) as the information was adjusted for the purposes of its inclusion in a qualifying country-by-country report in relation to the territory, or\n(b) if the information was not included in such a report, as it would have been adjusted had it been included in such a report.\nSee also paragraphs 6 to 6B which provides for circumstances in which further adjustments are required to profit (loss) before income tax and circumstances in which adjustments are required to qualifying income tax expense.\n(5) The information described in sub-paragraph (3)(a) to (d) that must be used to determine whether the tests in paragraphs 7 to 9 are met in relation to members of a multinational group in a territory must be derived from whichever of the following was used to prepare the qualifying country-by-country report in relation to the territory—\n(a) qualified financial statements falling within sub-paragraph (1)(a), along with any financial accounts treated as qualified financial statements as a result of sub-paragraph (2), or\n(b) qualified financial statements falling within sub-paragraph (1)(b), along with any financial accounts treated as qualified financial statements as a result of sub-paragraph (2).\n(6) Where that information in respect of a territory is not available in qualified financial statements of a multinational group, no election may be made in respect of that territory.",
  "extent": "E+W+S+N.I.",
  "status": null,
  "version": "current",
  "annotations": [
    {
      "type": "F",
      "label": "F1",
      "text": "Word in Sch. 16 para. 4(1)(a) substituted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 46(3)(a)(i), 72(4)"
    },
    {
      "type": "F",
      "label": "F2",
      "text": "Words in Sch. 16 para. 4(1)(a) inserted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 46(3)(a)(ii), 72(4)"
    },
    {
      "type": "F",
      "label": "F3",
      "text": "Sch. 16 para. 4(1)(b) substituted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 46(3)(b), 72(4)"
    },
    {
      "type": "F",
      "label": "F4",
      "text": "Sch. 16 para. 4(1A) inserted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 46(4), 72(4)"
    },
    {
      "type": "F",
      "label": "F5",
      "text": "Word in Sch. 16 para. 4(3) omitted (with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by virtue of Finance Act 2024 (c. 3), Sch. 12 para. 39(3)(a)(i)"
    },
    {
      "type": "F",
      "label": "F6",
      "text": "Sch. 16 para. 4(3)(d) and word inserted (with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 39(3)(a)(ii)"
    },
    {
      "type": "F",
      "label": "F7",
      "text": "Word in Sch. 16 para. 4(3)(d) inserted (with effect in accordance with Sch. 4 para. 72(4) of the amending Act) by Finance Act 2025 (c. 8), Sch. 4 paras. 46(5), 72(4)"
    },
    {
      "type": "F",
      "label": "F8",
      "text": "Words in Sch. 16 para. 4(4) substituted (in relation to accounting periods commencing on or after 31.12.2023) by Finance Act 2025 (c. 8), Sch. 4 paras. 47(3), 72(2)"
    },
    {
      "type": "F",
      "label": "F9",
      "text": "Word in Sch. 16 para. 4(5) substituted (with effect for accounting periods beginning on or after 31.12.2023 in accordance with Sch. 12 para. 1(2) of the amending Act) by Finance Act 2024 (c. 3), Sch. 12 para. 39(3)(b)"
    }
  ],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/ukpga/2023/30/schedule/16/paragraph/4",
    "retrieved_at": "2026-10-29T08:52:11.242356+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}