More supplementary draft guidance on UK Pillar Two issued

On 28 January 2025, HMRC released for consultation supplementary draft guidanceopens in a new tab in relation to the UK's implementation of the OECD's Pillar Two rules. This is the fourth tranche of draft guidance published by HMRC in relation to UK Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT). Previous tranches were published in June 2023opens in a new tab, December 2023opens in a new tab and September 2024opens in a new tab.

Consultation responses have been invited on both the latest and previously released draft guidance (as well as suggestions for any other content that might be helpful) on or before 8 April 2025, following which the guidance manual will be published in full in late spring 2025. HMRC have confirmed that this will be the last draft guidance document released as a consultation document, but comments on guidance after publication of the manual would still be welcome via HMRC’s Pillar Two dedicated inbox.

New content included in this release of the draft guidance includes:

Guidance on new provisions introduced under Finance Bill 2024-25 (the ‘Autumn Finance Bill’) which is currently making its way through Parliament, including the Undertaxed Profits Rule (UTPR);
Guidance on provisions significantly amended by the current Finance Bill 2024-25;
Guidance on joint venture groups, flow-through entities and the insurance sector;
Guidance on additional top-up amounts and post-filing adjustments of covered taxes; and
Pages that have been significantly amended following previous consultation responses.

The draft guidance also indicates certain areas where the UK is moving unilaterally. For example, under the UK Pillar Two legislation, each part of a protected cell company (PCC) is to be treated as an entity distinct from the other parts. This treatment extends to foreign PCCs incorporated under an equivalent foreign law. The Model Rules do not expressly consider this matter so there is some ambiguity around the treatment of PCCs. We are currently reviewing the draft guidance to identify similar variations to the Model Rules, along with other matters for HMRC’s consideration, which will be fed into our response.

HMRC have also confirmed that several changes are intended to be made to the guidance manual before it is published:

Changes following certain government amendments to the Finance Bill;
Inclusion of the map between UK Pillar Two legislation and the OECD Model Rules, and a reverse map;
Guidance on chargeability will be reorganised and brought together with the UTPR guidance; and
Further improvements will be made to the guidance before and after publication, including the reflection of points raised in the consultations.

HMRC are not intending to publish pages on eligible distribution tax systems, deductible dividend regimes, or multi-parent groups as these regimes and entities are not found in the UK.

Groups are encouraged to consider draft guidance content relevant to their circumstances and to reach out to the authors or their usual KPMG in the UK contact for support in raising these with HMRC.

For further information please contact: