Midweek Tax News

Posting on social media at the weekend, President Trump informally announced his intention that the US will consider imposing tariffs on countries that do not support the US’ acquisition of Greenland. In his post, he stated that goods imported to the US from the UK and five other countries would be subject to a 10% tariff with effect from 1 February, increasing to 25% from 1 June 2026, if no deal regarding Greenland has been reached. However, as of 20 January, no Executive Order or Proclamation had yet been made in relation to this proposal.

Sir Keir Starmer stated in a speech on Monday that the imposition of tariffs on allies is “completely wrong” and a diplomatic solution should be pursued. In response to questions about the potential for the UK to introduce retaliatory measures, he is reported to have stated that it is in “no-one’s interest” to have a trade war.

In addition to his informal announcements in relation to Greenland, President Trump has signed a Proclamation to immediately impose 25% tariffs on imports of semiconductors and related products. These will apply only to the extent they are not used in the US for certain activities (e.g. data centres, use by start-ups, R&D and strengthening the US’ manufacturing capacity). A global alert is available which looks in more detail at this Proclamation and the impact on businesses, and sets out some of the actions that affected businesses should consider. A separate Proclamation instructs the United States Trade Representative to enter into negotiations on imports of processed critical minerals, but does not impose any tariffs at this stage.

These US trade and tariffs developments will be covered in further detail in this week’s edition of our fortnightly Trade Talking Points newsletter. If you do not currently receive Trade Talking Points you can subscribe here. If you would like to discuss the impact of the recent tariff developments on your business, please get in touch with one of the contacts listed below.

As jurisdictions bring global minimum tax rules into their domestic laws, multinationals will need to find ways to calculate their new taxes, evaluate the impact on their financial statements, and report to the relevant tax authorities around the world. They will also need to adapt their internal processes and systems to manage the new computations and data and satisfy their new tax liabilities and reporting obligations. This may mean adopting a technology solution or outsourcing all (or part) of the Pillar Two process to an advisor. In the first instance, the focus may be on what your auditors may expect in support of year-end tax provisions covering Pillar Two. Either way being prepared for Pillar Two will require significant cross-functional coordination involving tax, accounting, legal, systems/IT and business stakeholders. With the recent release of the OECD side-by-side package providing detailed guidance and clarifications on the GloBE rules, staying informed has never been more important.

You can stay up to date by joining the next running of our BEPS Pillar Two University event, which is scheduled to take place over 4 days from 26 February to 3 March in our Canary Wharf offices. The event consists of four ‘in-person’ full-day workshops, which take a structured and rigorous approach to upskilling in-house tax professionals on Pillar Two and the GloBE minimum tax proposals.

In addition, the latest version of EY’s Pillar Two developments tracker, updated to 14 January, is available. The tracker provides a summary listing of administrative and legislative developments around the world relating to the implementation of the global minimum tax rules being developed under Pillar Two.

A global alert is now available which looks in detail at the measures included in the OECD’s side-by-side package which was released on 5 January. In addition, if you were not able to join our global webcast on 12 January, in which EY panellists shared initial insights on the latest OECD releases, an on-demand replay is available here. As a reminder, the package includes Administrative Guidance that introduces four new Safe Harbours and extends the Transitional Country-by-Country Reporting Safe Harbour by one year. Companies should review the package carefully, and monitor its implementation by relevant jurisdictions, as it contains new information that will have significant implications for the operation of the global minimum tax rules going forward.

In the case of The Boston Consulting Group UK LLP & Ors, the Upper Tribunal (UT) has considered the tax treatment of certain interests (‘Capital Interests’) that were held by individual partners (MDPs) in a firm.

Prior to 2011, the UK consulting business of the group was carried on through BCG Ltd, a wholly owned subsidiary of BCG Inc. In 2011 BCG Ltd contributed its business to a UK LLP and the MDPs then became members of the UK LLP. The group’s global compensation and equity framework for all MDPs included four compensation elements and an equity component (the LTCV). The compensation elements were paid to UK MDPs by allocation of profits of the UK LLP, and the Capital Interests were the method of implementing the LTCV. MDPs were granted Capital Interests, which they would be required to sell to BCG Ltd on the occurrence of certain events (including retirement), for proceeds linked to the change in value of BCG Inc shares.

The individual taxpayers argued that the Capital Interests were a share or interest in the UK LLP, representing a right to participate in the goodwill of the UK LLP, and that their disposal should be taxed on a capital gains basis. However, the UT disagreed. It considered that the true intention of the arrangements was to provide a payment to the MDPs on or in anticipation of their retirement by reference to the increase in the value of the BCG Inc shares over the period that they worked in the UK LLP as MDPs. Accordingly, it considered that the FT was correct in finding that the payments were not made in respect of any interest in the capital of the UK LLP or in its goodwill.

The UT then considered whether the amounts allocated to BCG Ltd should be taxed as an allocation of partnership profit to individual members under the “mixed membership rules” (MMR), which were introduced by FA 2014 with effect for 2014-15 and subsequent years. Disagreeing with the conclusion of the FT, it found that the conditions for the application of the MMR rules were satisfied for the relevant periods. As a result, for the years to which the MMR rules applied (2014-15 onwards) the allocation of UK LLP partnership profits to each MDP for tax purposes should be adjusted. The UT considered it was “just and reasonable” to do so by ascribing to each MDP the increase in value (if any) of their potential Capital Interests on a year-by-year basis. For the years to which the MMR did not apply (2012-13 and 2013-14), the UT agreed with the FT that payments received by the MDPs were taxable as miscellaneous income under s687 ITTOIA 2005. It also considered that the miscellaneous income rules would apply for all years, if it was wrong on the MMR analysis.

The UT went on to conclude that, if it was wrong that the MMR or s687 applied, the amounts would have been taxable as income under the sale of occupational income provisions.

The Committee of the whole House debate on certain provisions in Finance (No.2) Bill took place last week, on 12 and 13 January. Government amendments to increase the level of the threshold for Agricultural and Business Property Relief from £1m to £2.5m were agreed. No other amendments were made. The remaining clauses will be considered by a Public Bill Committee which will conclude by 26 February. Report stage and third reading (which constitutes substantive enactment for UK GAAP and IFRS purposes) will follow Committee stage.

The National Insurance Contributions (Employer Pension Contributions) Bill – which contains the primary legislation to limit the amount of employee pension contributions made via salary sacrifice that is exempt from NICs – is scheduled to have its third reading and to complete all remaining stages in the House of Commons today (Wednesday, 21 January).

Guidelines for Compliance (GfC7) – Help with common risks in transfer pricing approaches was published in September 2024 and is intended to help businesses reduce uncertainty in their transfer pricing (TP) compliance approaches by providing clarity about HMRC expectations.

The latest issue of HMRC’s Agent Update highlights that GfC7 has been updated to include new sections covering two areas. In new section 2.2.8, HMRC discusses how value chain analysis can be a valuable method for understanding how value is created across a multinational enterprise (MNE), helping to clarify the economically significant functions, assets and risks within a group. New section 3.8 deals with arrangements under which UK businesses receive procurement goods or services from an offshore connected party. This section provides a helpful overview of how HMRC understands the role, value generation, rewards and types of costs, savings and functions performed in such arrangements, with the aim of helping multinational businesses identify TP risk areas and take action to mitigate the risk of enquiry.

On Wednesday, 4 February, from 10:00, we are hosting a webcast looking at the latest e-invoicing developments and the steps that companies can take to prepare for the introduction of mandatory e-invoicing from April 2029. HMRC’s e-invoicing lead, Rachel Stirrat, will join us as a guest speaker to provide an update on HMRC’s plans in the coming year. EY panellists will then discuss what companies can do now to prepare for the go-live date. Topics will include evaluating current processes, systems and data for compliance, identifying suitable technology solutions and how to build a business case for budget and resources. If you would like to join this webcast, you can register here.

On 9 January, following a consultation process carried out in 2025, the European Commission published a final version of the Guidelines on the implementation of the Foreign Subsidies Regulation (FSR). As a reminder, the FSR came into force on 13 July 2023. It aims to prevent distortions of the EU's internal market that arise as a result of subsidies from non-EU countries. It can apply to EU as well as non-EU businesses that receive such foreign subsidies. The term "subsidies" is defined broadly and includes contributions, loans, grants, guarantees and tax benefits. The FSR therefore effectively expands the scope of the EU’s State Aid rules to also cover subsidies provided in non-EU jurisdictions. Further information on the FSR is available in our tax alert which was published in 2023.

The Guidelines provide clarification on a number of aspects of the application of the FSR, including how the Commission will assess whether there is a ‘distortion’ of competition caused by a foreign subsidy; how the assessment will be carried out in the specific case of public procurement processes; and how the Commission applies the balancing test (which weighs the negative effects of a distortive foreign subsidy against any possible positive effects).

In a webcast at 10:00 on 27 January, EY panellists will discuss recent developments in relation to the EU CBAM. Key topics will include changes introduced with the CBAM December 2025 package, compliance obligations applicable from January 2026, big-picture carbon-pricing developments and the European Commission’s ambitions to expand the scope of CBAM going forward. If you would like to join this webcast, please register here.

We have included links to a selection of our tax alerts below. Additional articles are available in our global tax alert library.

United States: The US Treasury and Internal Revenue Service have announced their intention to issue proposed regulations on (i) the transition rule for CFC sub-part F income in effect before the One Big Beautiful Bill Act amendments, (ii) the effective date of the rule which disallows a foreign tax credit for 10% of foreign taxes on certain previously taxed earning and profits distributions, and (iii) the exclusion from foreign-derived deduction eligible income (FDDEI) for sales or other dispositions of intangible property and other excluded property.

Algeria: In accordance with a law regulating foreign investments in Algeria, the Government has issued a decree which outlines the terms and conditions for obtaining prior authorisation for the transfer of shares or equity interest in Algerian companies engaged in activities within strategic sectors.

Argentina: Argentina has enacted a 'Tax Innocence Law' that includes changes to criminal and procedural tax laws. Changes include increased minimum thresholds for tax evasion to be subject to criminal penalties, increased penalties for failure to file tax returns and other formal obligations, and a reduction in the statute of limitations for taxpayers in certain circumstances.

Israel: Israel’s Qualified Domestic Minimum Top-up Tax was enacted on 31 December 2025 and applies from fiscal years beginning on or after 1 January 2026. Israel has not implemented the Income Inclusion Rule or Undertaxed Profits Rule mechanisms at this stage, nor the safe harbour provisions.

Singapore: The Inland Revenue Authority of Singapore has announced the implementation of a simplified and streamlined approach (SSA) for qualifying baseline marketing and distribution transactions between related parties, on a pilot basis from 1 January 2026 to 31 December 2028. The framework is aligned with the OECD published guidelines on Amount B of BEPS Pillar One.

Singapore: On 19 November 2025, the Inland Revenue Authority of Singapore released the eighth edition of its Transfer Pricing Guidelines, which include significant updates on various aspects of transfer pricing. Key updates include additional guidance on financial transactions, a new simplified and streamlined approach (SSA) for qualifying transactions and clarifications on the mutual agreement procedure for addressing double taxation.

Türkiye: Türkiye has announced a further extension of the filing and payment deadline for the Qualified Domestic Minimum Top-Up Tax (QDMTT) returns for the 2024 fiscal year. The deadline has been further extended to 28 January 2026.

Uruguay: Uruguay has issued a decree modifying its investment projects regime which includes corporate income tax incentives, with the new provisions effective from 1 February 2026. It will remain possible to file projects under the previous regime until 30 April 2026.

The latest edition of our summary of the international developments regarding permanent establishments is available. This month’s edition covers the introduction by Cameroon of Significant Economic Presence legislation.

West Africa's tax landscape is entering a decisive transformation phase, driven by the enactment of the Nigeria Tax Act (NTA) and ongoing incremental tax reforms in Ghana. However, the shift from legislation to effective implementation introduces short-term complexity alongside long-term structural considerations. A Global Tax Insights article is available which highlights how businesses can move from legislative awareness to strategic action.