Autumn Statement 2023: GloBE Model Rules (Pillar 2) Updates

Whilst not referenced in the Chancellor’s Autumn Statement, the Government has released a number of amendments to the Pillar 2 rules, which are generally designed to facilitate the effective implementation of the new rules.

Detailed commentary and administrative guidance will be provided by HMRC in due course, most importantly with the introduction of transitional simplified reporting.

The changes have the potential to ease the significant compliance burden faced by multinational groups.

Some of the key amendments are in the following areas:

1. a new transitional reporting election, which allows simplified jurisdictional and entity-level reporting during the first years of the regime
2. adjustments required to account for errors in prior accounting periods
3. the push down of profits from a main entity to a permanent establishment
4. flow-through entities, including the definition and location of a flow-through entity
5. Controlled Foreign Companies (CFC), including the calculation of the effective tax rate for a jurisdiction when a blended CFC regime also taxes entities that are not members of the multinational group
6. the calculation of eligible tangible assets and payroll costs within the substance-based income exclusion — this includes a power to make further provisions concerning the substance-based income exclusion
7. the valuation of assets where assets are transferred within the group
8. repayments of overpaid tax and repayment interest
9. the adjustments to the value of deferred tax assets where there is an intra-group transfer before entry into the multinational top-up tax and domestic top-up tax regimes
10. the definition of a Country-by-Country Report (CbCR) and the transitional CbCR safe harbour
11. the introduction of the qualified domestic top-up tax safe harbour — where members of the group are subject to a qualified domestic top-up tax in another jurisdiction that has been specified in regulations as meeting the safe harbour conditions, the filing member can make an election so that those members are treated as having no top-up tax amounts for the purposes of calculating multinational top-up tax — a separate election can also be made for any non-standard members of the group, for example joint venture groups, investment entities and minority owned members