The UK Treasury released draft legislation for consultation on implementing the transitional safe harbour anti-arbitrage rule. This initiative ensures the rule aligns with the OECD’s G20 Inclusive Framework’s December 2023 Administrative Guidance.

The measure presents draft legislation for the transitional country-by-country reporting (CbCR) safe harbour anti-arbitrage rule.

The draft legislation, issued on 29 July 2024, was complemented by an explanatory note and a policy paper on the multinational and domestic top-up tax—transitional country-by-country reporting safe harbour anti-arbitrage rule.

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.

Economic Impact
This measure is not expected to have any significant economic impacts. It is expected to have no effect on individuals as it only affects businesses. The measure is not likely to impact family formation, stability, or breakdown.

Only multinational enterprises with global revenues over EUR 750 million per annum are in the 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.

However, as this measure aligns UK legislation with the anti-arbitrage rule agreed internationally and published by the OECD, and the transitional safe harbour is temporary, it is expected that there will be no material impact on businesses.

Comments regarding the consultation are requested and can be submitted to PillarTwoConsulatation@hmtreasury.gov.uk by 15 September 2024.