UK: Consultation on supplementary draft guidance on Pillar Two global minimum tax rules

Last consultation before guidance manual will be published in late spring 2025

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February 6, 2025

HM Revenue and Customs (HMRC) on January 28, 2025, released for consultation supplementary draft guidance regarding the UK's Pillar Two global minimum tax rules.

This is the fourth tranche of HMRC draft guidance regarding the UK multinational top-up tax (MTT) and domestic top-up tax (DTT); previous tranches were published in June 2023, December 2023, and September 2024.

Consultation responses have been invited on both the latest and previously released draft guidance (as well as suggestions for any other content that might be helpful) on or before April 8, 2025, following which the guidance manual will be published in full in late spring 2025. HMRC has confirmed that this will be the last draft guidance document released as a consultation document, but comments on guidance after publication of the manual would still be welcome via HMRC’s Pillar Two dedicated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New content included in this release of the draft guidance includes: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 2024-2025 (“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 2024-2025
  • 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
  • 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The draft guidance also indicates certain areas where the UK is moving unilaterally.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 Pillar Two rules do not expressly consider this matter, so there is some ambiguity around the treatment of PCCs.

HMRC has 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 2024-2025
  • Inclusion of the map between UK Pillar Two legislation and the OECD model Pillar Two rules, and a reverse map
  • Guidance on chargeability will be reorganized and brought together with the UTPR guidance
  • Further improvements will be made to the guidance before and after publication, including the reflection of points raised in the consultations

HMRC is 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.

Read a February 2025 report prepared by the KPMG member firm in the United Kingdom

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