Corporation Tax

The Autumn Statement 2022 contained limited announcements regarding the UK corporation tax regime, with the exception of changes to the R&D tax incentives regime discussed later. This is welcomed given the quick U-turn by the new Chancellor in October 2022 to reverse a number of tax cuts previously announced in the September ‘mini-budget’, including retention of the planned increased in the corporation tax rate to 25% from 1 April 2023 for profits in excess of £250,000. 

Diverted Tax Profits (DPT)

Following the planned increase in the corporation tax rate from 1 April 2023, a 6% increase in the rate of DPT to 31% was confirmed in order to maintain the 6% differential above the headline corporation tax rate. This acts as an incentive to bring profits into the corporation tax charge rather than as Diverted Profits. 

OECD Pillar 2

Pillar 2 is the OECD’s recommendation that large multinational businesses (global revenues in excess of €750m) pay a minimum 15% rate of tax on profits in each country in which they operate. Draft legislation has already been issued and it is unsurprising that the UK government will continue its intention to implement the rules. 

As announced previously an Income Inclusion Rule (IIR) will broadly require large UK headquartered multinational groups to pay a top-up tax where their foreign operations have an effective tax rate of less than 15% for accounting periods beginning on or after 31 December 2023.

It has now also been confirmed that for accounting periods beginning on or after 31 December 2023 the Government will introduce a supplementary Qualified Domestic Minimum Top-up (QDMTT) tax rule which will require large groups, including those operating exclusively in the UK, to pay a top-up tax, broadly where their UK operations have an effective tax rate of less than 15%. The Government also confirmed its intention to implement the backstop Undertaxed Profits Rule in the UK, but with effect no earlier than accounting periods beginning on or after 31 December 2024. 

Transfer Pricing Documentation

Continuing the trend of international tax governance, and following the publishing of draft legislation in July 2022, the UK government will implement transfer pricing documentation rules to require large multinational businesses operating in the UK to keep and retain transfer pricing documentation in a prescribed and standardized format, as set out in the OECD’s Transfer Pricing Guidelines i.e. a Master File and Local File. 

The requirement will apply for accounting periods commencing on or after 1 April 2023 but again will only apply to those large multinational groups with global revenue in excess of €750m. 

Online Sales Tax

Following consultation, the UK government will no longer proceed with plans to introduce an online sales tax. The decision reflects concerns raised over the complexity of the rules and the risk of creating unintended distortion or unfair outcomes between those online retailers and high street shops. 

This is another welcome announcement to those businesses that are already facing uncertain times given significant increases in the cost of living, and doing business, in recent months.

Get in touch

If you have any questions on the business tax measures announced in the Autumn Statement, please contact Sara Hamill of our Tax team. We'd be delighted to hear from you.