A weekly update on tax matters to 27 February 2024
Midweek Tax News provides you with a succinct overview of the key tax developments that have occurred each week to allow you to stay up-to-date on tax issues that may have an impact on your business.
If you would like to discuss an article in more detail, please speak to the relevant contact listed at the end of this issue or to your usual EY contact. Alternatively, you can use our ‘contact us’ form. If you give us a brief description of your query (not just on this week’s content), we will send it to a relevant person in EY.
With one week to go until the Chancellor delivers his Spring Budget, speculation continues on the potential for tax cuts, primarily in the form of a limited reduction to either employee NICs or income tax. The latest rumours suggest increases in the inheritance tax threshold and to first-time buyer relief will not be included in the Budget, nor will we see a return to VAT-free shopping for overseas visitors. The Chancellor’s room for tax cuts looks to have reduced and there is pressure on him not to borrow or cut services just to fund tax cuts.
EY’s Budget webpage will be updated in the afternoon on 6 March with details of the Chancellor’s key announcements, and a summary will be emailed to Midweek Tax News subscribers later in the day.
As a reminder, our Spring Budget webcast will take place the following day, at 15:00 on Thursday 7 March, and will provide a summary of the Chancellor’s announcements and how they may impact individuals, employers and businesses. We’ll share insights covering tax rates and incentives, tax policy and economic analysis. If you have not yet registered to attend the webcast, you can do so here.
As highlighted in Midweek Tax News last week, on 19 February the OECD/G20 Inclusive Framework on BEPS released its report on Amount B of Pillar One, which provides “a simplified and streamlined approach to the application of the arm's length principle to baseline marketing and distribution activities”. A global alert is now available which discusses the implications for businesses in more detail.
As a reminder, Amount B, unlike other BEPS 2.0 measures, is not subject to a revenue threshold and can be applicable to many multinational businesses. Jurisdictions can opt to apply the Amount B ‘simplified and streamlined’ approach for in-scope transactions in fiscal years starting on or after 1 January 2025.
Following the publication of the Amount B report, the African Tax Administration Forum (ATAF) announced that it will revise its existing guidance on drafting transfer pricing legislation (Suggested Approach to Drafting Transfer Pricing Legislation) to include a model text to help its member countries to enact the new approach.
However, New Zealand has confirmed that it will not be adopting the ‘simplified and streamlined approach’. This means that existing transfer pricing rules and practice will therefore continue to apply to determine arm's length outcomes for foreign-owned distributors operating in New Zealand. Small foreign-owned wholesale distributors with revenue under NZ$30m may continue to apply an existing domestic simplification measure. New Zealand-owned distributors operating in foreign jurisdictions will need to continue to apply New Zealand transfer pricing rules in respect of their New Zealand tax obligations, regardless of whether the foreign jurisdiction has opted to apply the streamlined and simplified approach. A global tax alert is available providing further details.
These developments highlight the importance for groups to monitor whether and how the jurisdictions that are relevant to their business choose to implement Amount B, including assessing whether they may have in-scope transactions that involve a jurisdiction that implements Amount B and a jurisdiction that does not. The dates of implementation by relevant jurisdictions should also be monitored as this could be relevant to accounting for the tax impact, and consequently the effective tax rate of the group.
Other UK developments
In Shivani Mathur, the Upper Tribunal has upheld the decision of the First-tier Tribunal (FT), confirming that a payment made to the taxpayer by her former employer in settlement of Employment Tribunal proceedings was received in connection with the termination of her employment for the purposes of s401 ITEPA 2003 and was taxable. The issue in this appeal was whether the FT erred in law when it decided that the payment was received indirectly in consequence of, or otherwise in connection with, the termination of her employment for the purposes of s401(1)(a) ITEPA 2003.
Further detail on this case is available in last week’s edition of People Advisory Services Weekly Round Up.
On 23 February, the Migration Advisory Committee (MAC), an independent body that provides evidence-based advice to the government on migration issues, published a rapid review of the Immigration Salary List (ISL) for the UK.
As a reminder, the UK announced several changes to the immigration system in December 2023, including that the Shortage Occupation List (SOL) will be replaced with the ISL. On 17 January 2024, the government commissioned the MAC to carry out a rapid review of the new ISL. The report is intended to be used as an interim measure for the implementation of the new rules announced on 4 December 2023, ahead of a full review of the ISL expected to start later this year. Among other recommendations, the MAC review suggests 21 occupations for inclusion in the ISL. These 21 occupations consist of 18 recommendations for the UK-wide ISL and three for the Scotland-only ISL. Further details are available in our global mobility alert.
On 19 February, the UK government published a Statement of Changes to the Immigration Rules. The changes affect care workers and senior care workers under the Skilled Worker route, as well as individuals covered by the Ukraine Family Scheme, Homes for Ukraine Sponsorship Scheme, and Ukraine Extension Scheme. A global mobility alert is available.
Other International developments
On 20 February, the Isle of Man Income Tax Division published a Practice Note setting out the details of new tax measures to be applied to the petroleum sector and to banking and retail businesses, in line with its 2024/25 Budget. This includes a new 20% tax rate on corporate income from petroleum (including natural gas) extraction activities or rights, applicable from 6 April 2024. In addition, a temporary 15% income tax rate will apply to banks and large retailers for the 2024/25 tax year, ahead of the anticipated introduction of an Isle of Man domestic minimum tax in 2025 for large multinational enterprises.
The EU Commission has proposed a legal maximum payment term of 30 days between businesses across the EU, with mandatory interest charged on late payments. The proposed changes would not apply in the UK, but it will apply to any EU-based entities.
In a non-tax webcast by EY-Parthenon on 5 March at 10:00, our panel will share perspectives on the proposed legislation, including:
- Detail of the EU Commission’s proposals and rationale
- Regulatory landscape and expected timetable for the legislation
- Potential impact on corporates and actions that can be taken to prepare
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.
OECD: As highlighted in Midweek Tax News last week, the Council of the EU has removed four countries from its list of non-cooperative jurisdictions for tax purposes, and made a number of changes to the ‘grey list’. This alert looks at the changes in detail and also provides a useful summary of the implications of countries being included in the two lists.
Italy: Italy’s plastic tax comes into force on 1 July 2024. Affected taxpayers will have compliance obligations, including registering, filing quarterly tax returns and making payments. Implementing rules will be issued by year-end.
Malta: Malta has confirmed its decision not to adopt the income Inclusion Rule (IIR), Undertaxed Profits Rule (UTPR) and Qualified Domestic Top-up Tax (QDTT) of the OECD's Pillar Two GloBE rules for 2024; however transposition of certain aspects of the EU global minimum tax directive has been undertaken to meet EU obligations.
Saudi Arabia: Saudi Arabia has published new tax rules for Regional Headquarters (RHQ) to clarify tax reliefs available to RHQ entities. Multinational companies operating or planning to establish an RHQ in Saudi Arabia should assess the tax impact and eligibility for incentives based on transfer pricing and economic substance regulation compliance.
South Africa: The South African Government has indicated that it will implement the global minimum corporate tax for assessment years starting on or after 1 January 2024. Draft legislation has been published and comments are invited by 31 March 2024.
The latest edition of Trade Talking Points, our fortnightly newsletter on the latest trade insights from EY's Trade Strategy team, is now available. This edition provides updates on UK trade remedies, the status of the UK’s trade deals and negotiations including with the Ukraine, Nigeria and the Gulf Cooperation Council, and the EFTA-Chile Free Trade Agreement negotiations.
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If you would like to discuss any of the articles in this week's edition of Midweek Tax News, please contact the individuals listed below, Nicola Sullivan (+44 20 7951 8228) or your usual EY contact.
Spring Budget: 6 March
Chris Sanger (+44 20 7951 0150)
Pillar One Amount B: alert and implementation update
JP Borman (+44 121 262 4654)
For other queries or comments please email email@example.com.