UK issues guidance on Pillar Two rules

UK Government has published guidance on preparing for the two new taxes introduced in the UK as part of the international response to the challenges of digitalization.

The government had announced two new taxes as part of the UK adoption of the OECD Pillar Two rules: the Multinational Top-up Tax (MTT); and the Domestic Top-up Tax (DTT). These will apply to accounting periods that begin on or after December 31, 2023.

MTT will require all groups with both UK and non-UK entities and sufficient consolidated revenue to register with the tax authority. A charge may arise on UK parent members within such a group, where a UK parent member has an interest in an entity in a non-UK jurisdiction, and the group’s profits arising in that jurisdiction are taxed below the minimum rate of 15 percent.

DTT will require all groups with UK entities and sufficient consolidated revenue to register with the tax authority. A charge may arise on UK members within a domestic or multinational enterprise group where UK profits are taxed below the minimum rate of 15 percent.
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Groups will have UK obligations even if they do not have MTT or DTT liabilities. These obligations will apply to both UK-headed and non-UK headed groups irrespective of whether the jurisdiction of the Ultimate Parent Entity implements Pillar Two.