Spring Budget 2023: Key headlines for large corporates

Amanda Collinson

Amanda Collinson

Tax Director, International Taxes

A Budget for growth and building for the future, but what does it mean for larger corporates?

With the end of the super-deduction looming, it was widely expected that the Chancellor would announce other measures to incentivise continued capital investment. Full capital expensing for corporation tax purposes has been introduced (more of the details can be found in Aileen Scott's article highlighting the capital allowances changes) with David Rome considering the impact on the timing of corporation tax payments here.

For businesses with financing costs exceeding £2million per annum, there were several changes to the Corporate Interest Restriction rules. The Government has kept the rules under review since their introduction in 2017 and while most of the changes announced in this budget are intended to, for example, reduce unintended mismatches with a negligible overall impact expected to the Exchequer, there are some other welcome changes. For instance, enabling buildings under construction for use in a UK property business to be included as qualifying assets for the public infrastructure rules.

As previously announced, the Finance Bill 2023 will include transfer pricing legislation to require UK entities within large multinational groups to prepare transfer pricing documentation in the format specified by the OECD (which includes a Master File and Local File). This requirement applies to accounting periods beginning on or after 1 April 2023. This means that any groups which are in scope should be making sure they have processes in place to capture all the relevant information about their intercompany transactions from next month. The new legislation only applies to multinational groups with global revenues of EUR 750m or more. However, all groups that have intercompany cross-border transactions, of any quantum, should make sure that they have a documented transfer pricing policy and rationale for the pricing chosen. We continue to see transfer pricing as a hot topic in tax enquiries for groups with operations in multiple countries.  

Also in relation to transfer pricing documentation, the Government had previously consulted on whether large groups should be required to produce another document, called the Summary Audit Trail, which would explain how the company prepared its transfer pricing documentation. There is no further update on that consultation in the Budget documents, so this is still not a requirement, which is a relief for businesses already having to manage a significant tax compliance burden.

Similarly, of interest to only the largest groups, the Government continues to support the current globally agreed OECD Base Erosion & Project shifting project to introduce a global minimum tax. The UK will be introducing a top-up tax to make sure that the groups in scope have at least a 15% effective tax rate in every jurisdiction that they operate. This legislation will be included in Finance Bill 2023 and will apply to groups which have over EUR 750m global revenue in relation to accounting periods beginning on or after 31 December 2023.

The top-up tax will apply both to multinational groups and those which are exclusively operating in the UK. The draft legislation has been published, however many questions remain about how the rules will work in practice. This will require global co-ordination in a way that has not been seen before. UK parented groups that are going to be affected should start to think about whether they have processes in place to gather all the required information about their non-UK subsidiaries, which will be needed for the complex calculation.

Get in touch

Read the rest of our Spring Budget analysis on our Budget Hub, and for more information or to discuss any of the announcements, please don't hesitate to get in touch with me or another member of our corporate tax team.

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