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HM 46: Calculation process
or “How to calculate tax for multi-rate PIEs”
You could also call this:

“Working out how much tax a multi-rate PIE owes or is owed”

This section explains how to work out the tax liability or tax credit for multi-rate PIEs (Portfolio Investment Entities) for a calculation period.

You need to add up the amounts for each investor class, each investor, each attribution period, and each day in the attribution period. For foreign investors in a foreign investment PIE, you need to add up the amounts for each income source and investment type.

To calculate the amount, you use a formula: rate × amount. The rate is either the tax rate that applies to the investor each day, the tax rates for foreign investors, or 28% if the PIE is treated as the only investor. The amount is worked out using other sections of the law.

If the result is positive, it’s the PIE’s tax liability. If it’s negative, it’s usually a tax credit, but there are some exceptions. For example, if the PIE chooses to use the provisional tax calculation option, it won’t get a tax credit. Also, foreign investment PIEs don’t get tax credits for amounts attributed to foreign investors.

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Next up: HM 48: Adjustments to investor interests or to distributions

or “Changes to investor payments or shares when a PIE pays tax”
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Part H Taxation of certain entities
Portfolio investment entities: Calculating and paying tax liability

HM 47Calculation of tax liability or tax credit of multi-rate PIEs

  1. This section quantifies the amount of the tax liability or tax credit of a multi-rate PIE for a calculation period.

  2. The amount of the PIE’s tax liability or tax credit is the sum of the amounts calculated using the formula in subsection (3) for—

  3. each investor class in which the investor has an investor interest:
    1. each investor in an investor class:
      1. each attribution period in the calculation period:
        1. each day in an attribution period.

          1. For the purposes of subsection (2), for a notified foreign investor in a foreign investment PIE, the amount of the PIE's tax liability for each investor is the sum of the amounts calculated using the formula in subsection (3) for the amount attributed to the investor for each particular income source and investment type.

          2. The formula is—

            rate × amount.

            Where:

            • In the formula,—

            • rate is—
              1. the tax rate under section HM 58 or HM 60, as applicable, that relates to the investor for each day for the period; or
                1. the tax rates applying under schedule 6, table 1B (Prescribed rates: PIE investments and retirement scheme contributions) for an amount attributed to a notified foreign investor in relation to each income source and investment type; or
                  1. 28%, if the PIE is treated as the sole investor under section HM 37:
                  2. amount is the amount calculated under sections HM 36(1) and (2) and HM 37, as applicable, for the investor.

                    1. If the result of the formula in subsection (3) is positive, the amount is the PIE’s tax liability for the calculation period. If the result is negative, the amount is a tax credit of the PIE under section LS 1 (Tax credits for multi-rate PIEs), see section HM 55. However, a tax credit does not arise under section LS 1 for a multi-rate PIE that chooses to use the provisional tax calculation option.

                    2. If the result of the formula in subsection (3) is negative and the multi-rate PIE has chosen under section HM 71B to become a foreign investment PIE, no tax credit arises in relation to an amount attributed to an investor in the PIE who is, at the time of attribution, a notified foreign investor.

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                    Notes
                    • Section HM 47: inserted, on (applying for the 2010–11 and later income years), by section 292(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section HM 47(2)(a): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 98(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                    • Section HM 47(2B) heading: inserted, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 76(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section HM 47(2B): inserted, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 76(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section HM 47(4)(a)(i): amended, on , by section 6(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                    • Section HM 47(4)(a)(ib): inserted, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 76(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section HM 47(4)(a)(ii): amended, on , by section 6(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                    • Section HM 47(6) heading: added, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 76(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section HM 47(6): added, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 76(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section HM 47 list of defined terms foreign investment PIE: inserted, on , by section 76(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section HM 47 list of defined terms notified foreign investor: inserted, on , by section 76(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).