UK and International Tax news
HM Treasury Issues Update On Pillar 2 Consultation
Wednesday 15th June 2022
HM Treasury has issued an update on its consultation on the implementation of the OECD’s Pillar 2 rules in the UK.
The OECD issued Pillar 2 Model Rules in December 2021 and these rules define the scope and set out the mechanism for the so-called Global Anti-Base Erosion (GloBE) rules under Pillar 2. The next stage would be for countries to introduce domestic legislation to give effect to the agreed rules. The OECD’s October 2021 statement set out an aim for jurisdictions to legislate these rules in 2022, with effect from 2023.
HMT consulted on how the Pillar 2 Model Rules should be translated into domestic legislation in January 2022, anticipating that the parts of the legislation relating to the Income Inclusion Rule would be included in the Finance Bill 2022, to have effect from 1 April 2023. The consultation invited views on the UK implementation of the Undertaxed Profits Rule (UTPR) and on introducing a domestic minimum tax (DMT) in the UK to complement Pillar 2. The government anticipated that both the UTPR and the DMT would be introduced from 1 April 2024 at the earliest.
The consultation closed in April and more than 50 responses to the consultation were received. The Financial Secretary to the Treasury has now sent respondents an interim update on the implementation of Pillar 2. Financial Secretary Lucy Frazer has confirmed in her letter that they are pressing on with developing the draft legislation to be published in the Summer.
The FS advised that the Government had listened to the suggestions and areas of concern raised during the consultation. One of the points raised most consistently and forcefully in consultation responses was the need for a sufficient lead-in time before the rules are implemented in the UK. That is in recognition of the complexity of the rules, the fact that there remain important policy and administrative issues being discussed within the OECD Implementation Framework, and the need for businesses to take steps and build systems to be able to ensure rule compliance. In line with that, respondents noted that seeking to implement the rules from Spring 2023, ahead of the likely implementation date in other countries, would compromise the long-term success and sustainability of the regime and put UK businesses at a
competitive and administrative disadvantage.
The FS confirmed that the Government understands the points that have been made on this matter and, alongside the next steps in the consultation, will confirm in the Summer update that the UK Pillar 2 legislation will first apply to accounting periods beginning on or after 31 December 2023.
For more information on the above, please contact Keith Rushen on 0207 486 2378.
Contact Us