11 July 2025
‘L-Day’ will be 21 July 2025
The Exchequer Secretary to the Treasury, James Murray MP, has announced that a number of draft clauses intended for the next finance bill will be published on 21 July 2025 for technical consultation. The draft clauses, which will cover pre-announced policy changes, will be published on GOV.UK along with accompanying explanatory notes, tax information and impact notes, government responses to earlier consultations, and other supporting documents.
G7 statement on Pillar Two “shared understanding” regarding the US tax system
On 28 June 2025, the G7 released a statement on global minimum taxes, confirming that a “shared understanding” had been reached on the treatment of US-parented multinational groups under the OECD/G20 Inclusive Framework’s Pillar Two global minimum tax rules. The statement followed the US announcement that proposed section 899 (a provision targeting foreign taxes deemed to be discriminatory or extra-territorial) would be removed from the US reconciliation tax and spending package previously referred to as the One Big Beautiful Bill Act (OBBBA).
According to the G7 statement, US parented groups would be excluded from the income inclusion rule (IIR) and undertaxed profits rule (UTPR) in respect of their US and non-US profits under a proposed “‘side-by-side’ solution”. The side-by-side system would “include a commitment to ensure any substantial risks that may be identified with respect to the level playing field, or risks of base erosion and profit shifting, are addressed”. The G7 shared understanding will now be discussed and developed with other OECD/G20 Inclusive Framework countries. HM Treasury and Rachel Reeves have issued a press release in relation to the announcement.
HMRC publish guidance on Cost Contribution Arrangement Advance Pricing Agreements
HMRC have added two new pages to their International Manual (INTM422160 and INTM422170), on Cost Contribution Arrangement (CCA) Advance Pricing Agreements (APAs). As announced in the March 2025 consultation Advance tax certainty for major projects, HMRC are offering clearance on the UK transfer pricing treatment of CCAs via unilateral APAs under existing legislation. The new guidance sets out how HMRC operate the CCA APA programme, and describes the circumstances in which HMRC may enter into such an agreement. It includes a sample draft CCA APA, to help businesses “better understand the typical types of clauses which might be found within APAs and/or which may be suitable for APAs, depending upon individual circumstances.”
Building Safety Levy: draft regulations and guidance
On 10 July 2025, Alex Norris MP (Parliamentary Under Secretary of State for Building Safety, Fire and Local Growth) issued a written ministerial statement providing an update on the Building Safety Levy. In March 2025, the then Department for Levelling Up, Housing & Communities confirmed that the new Building Safety Levy, which will, with certain exemptions, apply to developers of new residential buildings in England requiring a building control application, will come into effect on 1 October 2026. Primary legislation for the levy was included in the Building Safety Act 2022.
The statement announces that the draft Building Safety Levy (England) Regulations 2025, which “provide for all aspects of the levy", including its calculation and administration, will be laid in Parliament. The regulations confirm that the levy will be charged on specified applications for building control approval made on or after 1 October 2026. The Ministry of Housing, Communities and Local Government has published associated operational guidance, which explains “how the levy is intended to be charged, collected and passed back to central government.”
Supreme Court dismisses taxpayer appeal on the meaning of “more than incidental”
The Supreme Court has unanimously dismissed the taxpayer’s appeal in the corporation tax case Dolphin Drilling Limited. The judgment concerns the ‘hire cap’ rules within Corporation Tax Act 2010, applicable to contractors in the offshore oil industry. The dispute centred on whether it was “reasonable to suppose” that the use of a leased converted oil rig (the Borgsten) for accommodation purposes was “unlikely to be more than incidental to another use, or other uses” to which the Borgsten was likely to be put. In the context of the provisions, Lord Hodge considered that the words “incidental to another use” should be given their ordinary meaning and that for a use to be “incidental to” another use, it must also arise out of that other use. Applying the test to the facts, the Supreme Court found that, whilst the accommodation use may have been a “secondary” use of the Borgsten, it was a separate, independent service and not “incidental to” its other uses, and thus dismissed the appeal.
HMRC publish latest estimate of the UK tax gap
HMRC have published the latest edition of their annual statistical publication Measuring tax gaps. The estimated ‘tax gap’ – HMRC’s best estimate of the difference between the amount of tax that should in theory have been paid, and what was actually paid – for the 2023/24 tax year was 5.3% (down from a revised estimate for 2022/23 of 5.6%), representing an estimated £46.8 billion of missed receipts out of total theoretical tax liabilities of £876 billion for the year.
HMRC publish statistics on illustrative tax changes
HMRC have updated their twice-annual statistical publication Direct effects of illustrative tax changes. The publication sets out HMRC’s latest ‘ready reckoner’ numerical estimates, subject to high level modelling and methodological assumptions, of what the effects would be on annual UK exchequer tax receipts of a range of hypothetical changes to a wide variety of UK tax rates and thresholds.
RCB 4 (2025): VAT deduction on the management of pension funds
HMRC have published Revenue and Customs Brief 4 (2025) on VAT deduction on the management of pension funds. The Brief announces a change in HMRC policy on employers’ ability to deduct VAT incurred on the administration of defined benefit pension funds and on the management of the fund’s assets. The policy change is to eliminate the dual use apportionment of investment costs by employers and trustees (that is, the 70/30 split on investment management and administration related costs); instead “all the associated input tax incurred will be seen as the employer’s and deductible by the employer, subject to normal deduction rules”. The impact of this change is a potential increase to VAT recoverability on both investment and administration costs, and simplified VAT accounting processes. Trustees supplying pension fund management services to employers will also be able to deduct input tax incurred for the purpose of providing those services, again subject to normal rules. The new policy will apply from 18 June 2025. HMRC also stated that they will publish additional guidance on the new policy by Autumn 2025.
EMEA Dbriefs tax webcasts
The EMEA Dbriefs programme is taking a break over the summer. Why not take this time to catch up on demand on some of our more recent webcasts that you may have missed. These include: Addressing the tax impacts of sustainability in the supply chain; Update on consultations on transfer pricing, permanent establishments and diverted profits tax; UK tax update - July; and Business leadership insights to deliver global talent agility. Please visit our Dbriefs website for more information, and to view any other recent webcasts on demand.