Business Tax Briefing

OECD Inclusive Framework Pillar Two updates

On 15 January 2025, the OECD/G20 Inclusive Framework published a number of documents related to the Pillar Two global minimum tax rules:

·     An updated version of the Pillar Two information return alongside: additional agreed administrative guidance on the basis for completing information returns; new annexes on notification templates and transitional penalty relief; a multilateral agreement for the exchange of information returns between tax authorities; and an agreed XML schema and user guide for the filing and exchange of information returns digitally. For further details, please see our alert.

·     A new central record of countries’ domestic Pillar Two legislation with transitional qualified status, and further administrative guidance in respect of deferred tax assets arising from tax benefits provided by governments. For further details, please see our separate alert.

Business rates bill completes Commons stages

The Non-Domestic Rating (Multipliers and Private Schools) Bill completed its House of Commons stages this week following its Report Stage and Third Reading debate on 15 January 2025. The Bill, introduced by the government in November 2024, will implement certain Autumn Budget business rates announcements in England, including: powers to create new lower business rates multipliers for qualifying retail, hospitality and leisure properties and higher multipliers for high value properties from April 2026; and the removal of the eligibility of private schools for charitable business rates relief from April 2025. The Bill was not amended during its Commons stages. The Bill had its First Reading in the House of Lords yesterday and is due to have its Lords Second Reading on 29 January 2025.

Australian public country-by-country reporting rules enacted

On 10 December 2024, Australia enacted new public country-by-country (CbC) reporting rules. The rules will apply to large multinational groups (with global annual turnover of AUD 1 billion or more – approximately EUR 600 million at today’s rates) with a non-small presence in Australia. The rules will require the annual reporting of certain tax and other information on a jurisdiction-by-jurisdiction basis. Data for Australia and specified countries will be reported individually, with data for the rest of the world aggregated and reported together. The rules will apply for businesses’ reporting periods commencing on or after 1 July 2024, with in-scope groups being required to report their information to the Australian Tax Office within 12 months of their year-end for publication. See Deloitte Australia’s alert for further details.

Kenya completes ratification of BEPS Multilateral Instrument

On 10 January 2025, the OECD announced that Kenya deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS MLI) on 8 January 2025. The BEPS MLI will first enter into force in Kenya on 1 May 2025. The 1973 UK-Kenya double tax treaty (as amended in 1976) is included in both Kenya’s and the UK’s MLI positions, and thus modifications to the operation of that treaty – including the introduction of a principal purpose test – will take effect in due course in accordance with Article 35 of the BEPS MLI. It is expected that HMRC will update the relevant page on GOV.UK with a ‘synthesised text’ showing the effect of the MLI’s modifications on the treaty. The OECD’s list of all countries’ provisional or ratified MLI positions is available here.

Yorkshire Agricultural Society: fund-raising events – Upper Tribunal

The Yorkshire Agricultural Society (the Society) is a charity that organises and runs the annual Great Yorkshire Show. For the VAT exemption for charitable fund-raising events to apply, the show’s primary purpose must be to raise money. In considering the VAT treatment of admissions to the 2016 show, the Upper Tribunal has upheld the First-tier Tribunal’s decision that the VAT exemption applied. The Upper Tribunal (UT) disagreed with the finding of the First-tier Tribunal (FTT) that the fund raising only had to be “a” primary (i.e., important) purpose, rather than “the” primary purpose. However, the UT agreed with the FTT that the fund raising was not a discrete purpose, but was one of two equally important and inter-dependent purposes, the other being education. These formed a single, main purpose of the show, satisfying the requirement for the VAT exemption. The UT also agreed with the FTT that the other UK legislative condition, that the show should be “promoted as being primarily for the raising of money”,  was not necessary to the requirement in the EU Principal VAT Directive that the fund-raising exemption should not distort competition, and that the condition was accordingly ultra vires. Consequently, applying a conforming interpretation (the Marleasing principle) to that UK legislative condition, the UT concluded that the preferable interpretation was that the word “primarily” should be deleted (as opposed to the deletion of the whole sub-clause). HMRC’s appeal against the FTT’s decision was accordingly dismissed. (Regarding the analysis around conforming construction, both parties agreed that the applicable law was the EU law in place at the end of the Brexit Implementation Period, 31 December 2020, as the supplies in question were made in 2016 and the Society’s claim for the repayment of overpaid VAT was made in 2020.) (Contact: Andrew Clarke)

EMEA Dbriefs webcasts

The next EMEA Dbriefs tax webcast is on Tuesday 21 January 2025 at 12.00 GMT/13.00 CET. Talent has no boundaries: challenges and solutions for retaining a global workforce, hosted by Liz Pierson, is the sixth and final webcast in our Global Employer Services A world of talent series, exploring the world of managing, attracting and retaining global talent. Our presenters will discuss employee retention and incentivisation challenges that can arise when managing a global workforce, approaches to reward philosophy and communication strategies, and how employee equity can be used as part of a solution for keeping global talent engaged.