Budget 2023: Large Corporates

The Chancellor announced the following measures for large corporates, including Transfer Pricing, top-up taxes, energy levies and REITs, in his Spring 2023 Budget.

Amendments to the Corporate Interest Restriction (CIR)

From 15 March 2023

• The worldwide debt cap rules in Part 7, TIOPA 2010 are being changed where a revised statement of allocated disallowances is submitted following the closure of an enquiry or litigation settlement..

From 1 April 2023 or Finance Bill 2023 Royal Assent:

• The government will legislate to address various anomalies in the CIR legislation. These changes will protect Exchequer revenues, remove unfair outcomes and reduce the administrative burden on businesses.

Policy paper: Amendments to Corporate Interest Restriction

OECD Pillar Two: Multinational and domestic top-up taxes

For accounting periods beginning on or after 31 December 2023:

• UK headquartered multinational groups will have to pay a top-up tax where any foreign subsidiaries have an effective rate of tax that is less than 15%.
• All large corporate groups, including UK-only, will have to pay a supplementary domestic top-up tax, where the UK operations an effective rate of tax that is less than 15%.

The rules apply to large groups with over €750 million in global revenues. This is the adoption of the  Organisation for Economic Co-operation and Development's (OECD’s) Pillar 2 framework for a global minimum tax rate, as announced in the Autumn Statement 2022. The legislation will be part of Finance Bill 2023.

Policy paper: Introduction of the new multinational top-up tax and domestic top-up tax

Transfer Pricing (TP) documentation

For accounting periods beginning on or after 1 April 2023:

• Large multinational groups will be required to prepare TP documentation made up of a Master File and Local Files, in accordance with the OECD Guidelines.
• HMRC are continuing to consult on the introduction of a Summary Audit Trail, detailing steps taken in preparing the documentation.

The rules apply to large groups with over €750 million in global revenues. This was announced on 20 July 2022 but will be legislated for in the Spring Finance Bill 2023.

Policy paper: Transfer pricing documentation requirements for UK businesses

Corporation Tax main rate amendment for Patent Box

From 1 April 2023:

• Legislation for the Patent Box will refer to the ‘applicable rate’ instead of the ‘main rate’, so claimants will get relief at their effective rate of tax once the tax rates split.

Policy paper: Patent Box – consequential amendment to Patent Box deduction formula

Energy Generator and Profits Levies

From 1 January 2023:

• A 45% levy will apply to exceptional electricity generation receipts from non-fossil fuels, where the corporate group has more than 50,000 MWh of in-scope generation per annum.
• The investment allowance in the Energy Profits Levy will be set at 80% when incurred on upstream decarbonisation.

These announcements were made in the Autumn Statement 2022 and will be legislated for in the Spring Finance Bill 2023.

Policy paper: Energy Generator Levy: introduction

Policy paper: The decarbonisation allowance in the Energy Profits Levy

Amendments to the rules for Real Estate Investment Trusts (REITs)

From 1 April 2023:

• The three-year development rule for property disposals will be amended.

From Spring Finance Bill 2023’s Royal Assent:

• Where a REIT owns one commercial property worth £20 million or more, the rule on owning at least three properties will be relaxed.

The amendments are meant to make the regime more competitive, combat the effects of inflation and restore original intention where required. These changes were announced at the Edinburgh Reforms on 9 December 2022 and will be legislated for in the Spring Finance Bill 2023.

Policy Paper: Amendments to the Real Estate Investment Trusts regime

Amendments to the Qualifying Asset Holding Companies (QAHCs) rules

As announced on 20 July 2022:

• The Spring Finance Bill 2023 will make various changes to the rules in order to allow them to align better with the intended scope and effect.
• The changes will have effect from various dates depending on the specific changes, namely, 20 July 2022, 15 March 2023, Royal Assent of the Spring Finance Bill 2023 or will have been deemed to have always had an effect.

Policy paper: Amendments to the Qualifying Asset Holding Companies rules

Amendments to the Genuine Diversity of Ownership (GDO) condition

From Royal Assent of the Spring Finance Bill 2023:

• The GDO condition, which is intended to prevent funds that are only open to a small number of predetermined investors from benefitting from those regimes, will be amended.
• The changes will improve the operation of the GDO condition for fund structures involving multiple pooling vehicles.

Policy paper: Amendments to the Genuine Diversity of Ownership (GDO) condition

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Useful guides on this topic

Spring Budget 2023: at a glance
Freeview summary of the measures announced in the Budget 2023

External links

Reform of Research and Development Tax reliefs

Additional Tax Relief for Research and Development intensive small and medium-sized enterprises

Venture Capital Schemes: expansion of the Seed Enterprise Investment Scheme (SEIS)

Transfer pricing documentation 

Introduction of the new multinational top-up tax and domestic top-up tax

Amendments to the Real Estate Investment Trusts regime