Pillar Two: Updated draft Finance Bill legislation

L-Day draft legislation on UK UTPR and other amendments to the UK Pillar Two rules has been revised

L-Day legislation revised

On 18 July 2023 (L-Day), the Government published draft legislation to amend Finance (No.2) Act 2023, which introduced the Multinational Top-up Tax and Domestic Top-up Tax as part of the UK’s adoption of the OECD’s Pillar Two Global Anti-Base Erosion (GloBE) rules. On 27 September 2023, an updated version of this draft legislation was published. Of particular note, the expected Transitional Undertaxed Profits Rule (UTPR) safe harbour, which will apply where a jurisdiction’s headline tax rate is at least 20 percent, has now been included in the Government’s package of amendments to the existing UK domestic legislation.

The draft legislation was updated to “include further amendments, including some affecting the Domestic Top-up Tax, to reflect the latest administrative guidance issued by the G20 — Organisation for Economic Co-operation and Development inclusive framework.” These also include updates to reflect stakeholder observations on the Finance Act and L-Day publications, including on: 

  • Currency conversion rules;  
  • Tax credits;  
  • Substance-based Income Exclusion;   
  • Qualified Domestic Minimum Top-up Tax (QDMTT); and  
  • QDMTT and Transitional UTPR safe harbours.  

The latest version of the draft legislation is open for a further period of consultation until 25 October 2023.

We will provide further details on the new Transitional UTPR safe harbour and the other amendments in the next edition of Tax Matters Digest.