Further to the responses received as part of its 'OECD Pillar 2: Consultation on implementation' on setting a global minimum tax rate, the Government notes that companies have expressed key concerns centred around early implementation. It indicates that the global minimum tax rate will not be introduced until 31 December 2023.

  • Following the historic signing of a deal to implement a Global Minimum Tax Rate, the government published 'OECD Pillar 2: Consultation on implementation', which was open from 11 January 2022 until 4 April 2022.
  • The consultation focused solely on how the Organisation for Economic Co-operation and Development's (OECD's) Pillar 2 and the global minimum tax rate, in particular, could be introduced and implemented in the UK. The suggested approach was, in summary:
    • The UK's Income Inclusion Rule (IRR) would apply to all UK-headquartered Multinational Enterprises (MNEs) with consolidated revenues of over €750 million. The parent company would then be subject to a top-up tax, where the group had interests in territories where it paid less than 15% tax.
    • The Undertaxed Profits Rule (UTPR) would also apply to UK entities of non-UK headquartered MNEs if the global minimum tax rate was not applied in other territories.
    • In the first year of the rules applying to a group, an extended filing deadline of 18 months would be given to allow for the transition.
    • To protect UK revenues and simplify the policy, a Domestic Minimum Tax (DMT) could be imposed on qualifying MNEs.
  • The intended timeline was to legislate in Finance Bill 2022-23, with the rules taking effect from 1 April 2023.

The responses focussed on:

  • Having enough time to understand and prepare for the rules, given the complexity involved.
  • Potential downsides of implementing by April 2023. This would be in advance of many other territories, which could lead to competitive and administrative disadvantages for UK businesses.

As a result of this, the government has announced that the implementation of the rules has been postponed from April 2023. The rules will now apply for businesses with accounting periods starting on or after 31 December 2023.

A full update will also be published later in the summer.

Useful guides on this topic

OECD publishes 15% global minimum tax rate details that will raise $150 billion 

BEPS & Diverted Profits Tax (for SME owners)
What is BEPS? What is Diverted Profits Tax? Will either of these affect me or my SME clients? 

Diverted Profits Tax
Large multinational enterprises (MNEs) that use arrangements between connected parties to divert profits away from the UK and avoid UK tax, will be subject to the Diverted Profits Tax (DPT). Who does it apply to? What are the rules?

External links

OECD Pillar 2: Consultation on implementation

Letter from the Financial Secretary to respondents of the OECD Pillar 2 implementation consultation

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