Pillar Two: Addition of Pillar Two anti-abuse rule in the UK
On 14 March 2024, the UK Government published a Written Ministerial Statement (‘the Statement’) regarding the addition of an anti-abuse rule in the UK in respect of Pillar Two, to be legislated in a future Finance Bill and to apply these provisions from 14 March 2024. In particular, the Statement directly references the Administrative Guidance published by the OECD on 18 December 2023 which includes anti-avoidance rules where multinational enterprises (MNEs) had sought to enter into certain transactions or arrangements with the intention of exploiting the Transitional Country by Country Reporting (CbCR) safe harbours for the Pillar Two regime. The Administrative Guidance specifically references hybrid arbitrage arrangements including deduction/non-inclusion arrangements, duplicate loss arrangements, and duplicate tax recognition arrangements. The Administrative Guidance also indicates that these rules should apply to transactions entered into on 15 December 2022 (i.e. the date upon which the OECD published the original Safe Harbour and Penalty Relief document), but where jurisdictions cannot incorporate this retroactively into domestic law due to constitutional (or other similar) grounds then the Administrative Guidance states that 18 December 2023 should be the applicable date. It is notable that the Statement indicates that the UK Government instead intends to apply these provisions from 14 March 2024 and not the earlier dates provided for in the Administrative Guidance. It is also notable that the Statement specifically focuses on the anti-abuse rule and does not reference other parts of the December 2023 Administrative Guidance, although it notes that the UK Government will consult with stakeholders on how the provisions will be legislated.