Tax News Update    Email this document    Print this document  

June 20, 2022
2022-0954

UK delays implementation of OECD Pillar Two to accounting periods beginning on or after 31 December 2023

On 14 June 2022, along with other respondents to the United Kingdom's (UK) consultation on the implementation of the Organisation for Economic Co-operation and Development (OECD) Pillar Two, EY received a letter from the UK Financial Secretary to the Treasury (FST) providing an update on the work to implement the OECD Pillar Two rules in the UK and what to expect in the coming months.

The UK consultation on how the Pillar Two rules will be implemented in domestic legislation has now closed. More than 50 responses to the consultation were received and the UK Government is now moving forward with the development of the draft legislation, which it will publish this Summer. It will continue to engage with the OECD Implementation Framework as it does so.

The letter from the UK FST notes that one of the points raised most consistently and forcefully in consultation responses was the need for a sufficient lead-in time before the rules are implemented in the UK. Respondents pointed to the complexity of the rules, the fact that there remain important policy and administrative issues being discussed within the OECD Implementation Framework, and the need for businesses to take steps and build systems to be able to ensure rule compliance.

In line with that, respondents noted that seeking to implement the rules from Spring 2023, ahead of the likely implementation date in other countries, would compromise the long-term success and sustainability of the regime and put UK businesses at a competitive and administrative disadvantage. As a result, the UK Government has advised that, alongside the next steps in the consultation, it will confirm in the Summer that the UK Pillar Two legislation will first apply to accounting periods beginning on or after 31 December 2023.

No further information was given as to the timing of the publication of the next steps and/or draft legislation (other than it will be in the summer) or the impact on the subsequent adoption dates for the domestic minimum tax (DMT) and undertaxed payment rule (UTPR) which were originally scheduled for some time after initial adoption of the income inclusion rule (IIR) provisions.

———————————————
CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), London

Ernst & Young LLP (United States), UK Tax Desk, New York

Ernst & Young LLP (United States), FSO Tax Desk, New York

Ernst & Young LLP (United States), Transaction Tax Desk, New York

Ernst & Young LLP (United States), UK Tax Desk, Chicago

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement