Measure
Following earlier consultation, the government has confirmed that it will implement the OECD Pillar Two global minimum tax rules in the UK through the introduction of:
an income inclusion rule which will require large UK headquartered multinational groups to pay a top-up tax where their overseas operations have an effective tax rate of less than 15%. This follows draft legislation published in July 2022; and
a qualified domestic minimum top-up tax (QDMTT). Large groups will be required to pay a top-up tax where their UK operations have an effective tax rate of less than 15%.
The government also intends to implement the (backstop) undertaxed profits rule (UTPR) in the UK.
Large multinational groups operating in the UK with global revenues over €750m, including those operating exclusively in the UK.
Both the income inclusion rule and QDMTT will apply for accounting periods beginning on or after 31 December 2023, and will be legislated for in the Spring Finance Bill 2023.
The backstop undertaxed profits rule will apply no earlier than accounting periods beginning on or after 31 December 2024.
A UK domestic minimum tax was widely anticipated and the government has chosen to introduce this from 2024, along with the income inclusion rule.
The government estimates that by 2027/28 the changes will raise £2.3 billion a year, although there are uncertainties around what changes other countries might make to their own tax systems that would affect the outcome.