In a surprise announcement today the UK government has postponed the start date for its Pillar 2 top-up tax rules by nine months to 31 December 2023.
This welcome news was delivered in the form of a short letter from the Financial Secretary to the Treasury (FST). That explains the government has deferred commencement of the new rules in response to overwhelming feedback from respondents to its recent consultation on Pillar 2 implementation. It’s likely that the EU’s recent decision to defer implementation of its Pillar 2 rules to 31 December 2023 was also a relevant factor.
It isn’t clear whether the postponement will only affect the Income Inclusion Rule (which the government originally intended to bring into effect from 1 April 2023) or will also push back the start date of the Undertaxed Profits Rule (originally 1 April 2024). That question may be answered soon – the FST’s letter confirms that the government will still publish draft legislation in the summer.
Heads of tax at large businesses – and the HMRC officials responsible for building the new return infrastructure – will now be able to relax a little bit more on the beach this summer. That respite may be fleeting, however. Even with an extra nine months their teams will still have a challenging task to familiarise themselves with the complex rules and adapt their processes to the new reporting requirements, most of which are still being designed.
Keep up to date with the latest developments and other useful information on our OECD BEPS 2.0 hubpage.