The Autumn Statement confirms that the government will make a number of technical amendments to the multinational top-up (MNTT) tax legislation – the legislation which implements the OECD's "Pillar 2" global minimum tax for larger multinationals. These changes reflect administrative guidance on Pillar 2 issued by the OECD since the original legislation was passed, and ensure that the UK rules are fully consistent with the OECD model. They take effect from the introduction of MNTT, which applies for accounting periods beginning on or after 31 December 2023.
In a welcome simplification, the government has also decided that the introduction of MNTT means that it can abolish the income tax charge on "offshore receipts from intangible property" (ORIP). The ORIP charge was introduced in 2019, and applied to income received by foreign individuals and companies in respect of intangible property that derived from sales made in the UK. As the ORIP charge was an extraterritorial charge that was clearly incompatible with the UK's tax treaties, it applied only to persons resident in territories with which the UK does not have a tax treaty.
When it was first announced, ORIP appeared to be targeted at the type of IP holding structures used by technology companies that had received adverse media publicity, but by the time it was introduced, these had already been largely unwound as a result of other changes made by the OECD to the international tax system – so there was always a sense that it had missed its mark. Once introduced, however, it did pose complications for multinationals which happened to hold intellectual property in non-treaty jurisdictions for entirely commercial reasons.
From 2024, any undertaxed profits in a non-treaty jurisdiction will be within Pillar 2 where the group is within scope, which would pick up profits currently caught by ORIP. In addition, as ORIP was a unilateral UK tax charge which is inconsistent with OECD principles, there is nothing in the Pillar 2 model rules which indicates whether and how it would be taken into account as a "covered tax" for the purposes of ascertaining whether a group company was paying an effective tax rate of 15%. If it were not taken into account, this could potentially result in double taxation. The abolition of ORIP means that in-scope multinationals, thankfully, won't have to grapple with this conundrum.
