8 August 2025
HMRC have published their Pillar Two guidance manual containing technical guidance setting out HMRC’s views on the operation of multinational top-up tax and domestic top-up tax, the UK’s implementation of the OECD Inclusive Framework’s Pillar Two global minimum tax rules. The publication follows four earlier public consultations on draft manual guidance released between June 2023 and January 2025.
The introduction to the manual notes that HMRC are finalising further pages on a range of specific Pillar Two topics with the intention that these will be released “shortly”. HMRC continue to invite any feedback on an ongoing basis and will continue to update the manual in response to comments received and any new relevant legislation.
HMRC have launched a ‘one-to-many’ letter campaign, aimed at companies that may have miscalculated corporation tax marginal relief in their submitted company tax returns. Marginal relief, re-introduced with effect from 1 April 2023, generally applies to reduce the corporation tax liability of companies with taxable profits between lower and upper limits of £50,000 and £250,000 respectively. The relevant legislation, however, requires these limits to be reduced proportionately whenever a company has one or more ‘associated companies’ in an accounting period. HMRC’s letters state that they “have information that shows your company has associated companies, but hasn’t declared them when claiming Marginal Relief on a Company Tax Return”. HMRC request that recipients review their relevant returns and respond within 30 days. Letters are planned to be issued between July and October 2025.
On 6 August 2025, the OECD published a list of signatory jurisdictions to the Multilateral Competent Authority Agreement on the Exchange of GloBE Information (GIR MCAA). First published in January 2025, and similar to earlier multilateral exchange agreements (e.g., for the sharing of country-by-country reports), the GIR MCAA can form the legal basis for exchange relationships between tax authorities for the agreed dissemination approach for Pillar Two information returns (GIRs). Signatory jurisdictions will need to notify the OECD which other jurisdictions they wish to receive and/or send information in order for an exchange relationship to be activated. In due course, the OECD is expected to maintain and publish online lists of pairs of jurisdictions between which information return exchange relationships are active. For more background on the GIR MCAA see Deloitte Tax@Hand here.
The 14 countries that have signed the GIR MCAA (to date) are the UK and the following: Austria, Belgium, Denmark, France, Ireland, Italy, Japan, Korea, Luxembourg, New Zealand, Portugal, Slovakia, and Spain.
Yesterday, the Bank of England’s Monetary Policy Committee announced a decrease in the official Bank Rate by 0.25 percentage points from 4.25% to 4%. HMRC have updated their interest rate tables to reflect the automatic 0.25 point decreases to interest rates for late tax payments and tax repayments as a result. The tables indicate that the newly-reduced rates take effect from 18 August 2025 for quarterly instalment payments of corporation tax, and from 27 August 2025 for most other tax payments.
The Upper Tribunal has issued its decision in a case concerning mini umbrella companies (MUCs), and their use of the VAT flat rate scheme (FRS) and the annual employment allowance (EA) for employer national insurance contributions. Thousands of other appeals are stayed pending the outcome of these lead cases. HMRC had deregistered the MUCs from VAT, on the grounds that the MUC scheme was fraudulent, issued assessments on the basis that they were not entitled to use the FRS, and denied their entitlement to use EA. The First-tier Tribunal held that although there were objective grounds for HMRC to conclude that the MUCs’ VAT numbers were being used for fraudulent purposes, HMRC could not prove that the MUC directors knew or should have known that the VAT registration was being used fraudulently. Consequently, HMRC could not deregister the MUCs. However, the First-tier Tribunal (FTT) endorsed HMRC’s decision to deny the MUCs the benefit of the FRS and the EA. HMRC and the MUCs each appealed the FTT decision.
The UT has found there was no need for HMRC to establish that the MUC directors knew or should have known that they were facilitating a fraud to deregister the MUCs. That there were objective grounds for concluding that the VAT numbers would be used fraudulently was sufficient. The UT agreed with HMRC and the FTT’s decision with respect to the use of the FRS and the EA. HMRC’s appeal was upheld, and the MUCs’ appeal was dismissed.
Business Tax Briefing is taking a brief break for summer.