On July 20, 2022, the UK government published a Finance Bill 2023, together with Tax Information and Impact Notes (TIIN), explanatory notes and responses to certain consultations. Among the various measures covered by the bill, we note in particular:
- amendments to the recently introduced UK Qualified Asset Holding Company (QAHC) regime, which aim to make it easier for certain types of fund entities to enter the regime, extend the existing anti-fragmentation rule and allow investment fund to be treated as satisfying the diversity of ownership conditions by close association with another investment fund satisfying the condition;
- new transfer pricing documentation requirements for large multinational companies operating in the UK, including a requirement to maintain a master file containing information for all members of the group and a local file referring specifically to large transactions of the local taxpayer, each in a prescribed and standardized format as per the Organization for Economic Co-operation and Development (OECD) transfer pricing guidelines, and to complete a synthetic audit trail (in the form a questionnaire specifying the main actions carried out as part of the preparation of the local file);
- changes to the law and processes for research and development (R&D) tax relief, which broaden the categories of eligible expenditure, aim to focus relief more effectively on UK expenditure and impose certain requirements for submitting pre- claim notifications and provide additional information in support of claims; and
- the introduction of an “additional tax” on UK parent companies that are members of multinational enterprise groups (MNEs), where group profits from a subsidiary jurisdiction are subject to a lower effective rate of tax at 15%.
The Complementary Tax Legislation, in particular, heralds a further step towards the UK implementing the OECD’s so-called ‘Pillar 2’ proposals for the imposition of a global minimum tax rate for multinationals. in the jurisdictions in which they operate. Pillar 2 has been the subject of numerous discussions and debates, taking into account in particular the remarkable complexity of the “model rules” enacted by the OECD, the preparation necessary for companies to understand the rules and the fairly ambitious given the precedent. In the UK, the rules were originally due to come into force on April 1, 2023, but now (subject to any further delays) they appear likely to apply to accounting periods beginning on or after December 31, 2023; the postponement of UK implementation reflects and is consistent with more widespread delays in the overall Pillar 2 implementation timeline.