Policy paper

Multinational top-up tax and domestic top-up tax — transitional country by country reporting safe harbour anti-arbitrage rule

Published 29 July 2024

Who is likely to be affected

Multinational groups with annual global revenues exceeding 750 million euros that have business activities in the UK.

General description of the measure

Multinational Top-up Tax and Domestic Top-up Tax are the UK’s adoption of the income inclusion rule and domestic minimum top-up tax rule in the Global Anti-Base Erosion (GloBE) Rules agreed by the UK and other members of the Organisation for Economic Co-operation and Development (OECD) G20 Inclusive Framework on base erosion and profit shifting.

The OECD Inclusive Framework became aware of avoidance transactions that were designed to exploit differences between the tax and accounting rules to allow groups to qualify for the transitional country-by-country reporting safe harbour where they would otherwise not have.

This measure implements an anti-arbitrage rule which protects the UK from a loss of tax. It also ensures that UK legislation remains consistent with OECD administrative guidance on the GloBE rules agreed by the UK and other members of the Inclusive Framework.

Policy objective

This measure is part of Pillar 2 of the 2-pillar solution to reform the international tax framework, which was developed by the UK and other members of the Inclusive Framework.

It ensures that UK legislation remains consistent with the agreed GloBE rules, commentary and administrative guidance, and that tax due in the UK is protected.

This measure protects yield scored at a previous fiscal event and so does not have an exchequer impact.

Background to the measure

In October 2021, over 130 countries and jurisdictions in the Inclusive Framework reached agreement on a two-pillar solution to reform the international tax framework in response to the challenges of digitalisation. The GloBE Rules, commentary and administrative guidance have been published by the OECD pursuant to this agreement.

The agreement was followed by a consultation on the UK implementation of the GloBE rules which closed in April 2022. The government introduced Multinational Top-up Tax and Domestic Top-up Tax in Finance (No.2) Act 2023.

On 14 March 2024, a written ministerial statement was published announcing this measure.

Detailed proposal

Operative date

The measure will be effective from the publication of the Written Ministerial Statement on 14 March 2024.

Current law

Multinational Top-up Tax and Domestic Top-up Tax were introduced in the Finance (No.2) Act 2023 and have effect in respect of accounting periods beginning on or after 31 December 2023.

A package of amendments to these rules were contained within Schedule 12 Finance Act 2024.

Proposed revisions

Part 3 and Part 4 of Finance (No.2) Act 2023 will be amended to facilitate the effective implementation of the GloBE rules, commentary and administrative guidance as these continue to evolve. This amendment relates to a transitional ‘Country-by-Country Reporting’ safe harbour anti-arbitrage rule agreed by the OECD Inclusive Framework in December 2023. The amendment will insert legislation containing the new rule in schedule 16 to Finance (no.2) Act 2023 after paragraph 6.

Summary of impacts

Exchequer impact (£ million)

2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029
nil	nil	nil	nil	nil	nil

This measure is not expected to have an Exchequer impact.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

There is expected to be no impact on individuals as this measure only affects businesses. The measure is not expected to impact on family formation, stability, or breakdown.

Equalities impacts

It is not anticipated that there will be impacts for those in groups sharing protected characteristics.

Impact on business including civil society organisations

Only multinational enterprises with global revenues in excess of 750 million euros per annum are in scope of this measure. This measure is expected to have a negligible impact on these multinational enterprises and how they calculate their multinational top-up tax and domestic top-up tax liabilities.

One-off costs could include familiarisation with the amendment to ensure it is administered correctly, and the extent to which it could affect the application of the transitional country-by-country reporting safe harbour. Continuing costs could include ensuring the group’s GloBE calculations are performed consistently with the amended legislation.

However, as this measure aligns the UK legislation with the anti-arbitrage rule agreed internationally and published by the OECD, and the transitional safe harbour is temporary, we do not expect it to have any material impact on businesses.

Customer experience is expected to remain broadly the same as it does not alter how businesses would interact with HMRC.

This measure is not expected to impact civil society organisations.

Operational impact (£ million) (HMRC or other)

This measure will be delivered as part of the existing programme that has been established to implement Pillar 2 in the UK, so there are no further operational costs for HMRC.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from tax returns.

Further advice

If you have any questions about this change, please contact the Pillar 2 Team by email: [email protected]