As trailed on X (previously Twitter), the Chancellor delivered the Autumn Statement on 22 November 2023 with “110 different measures to grow the British economy”. I admit that I have not counted the measures to verify this, but the list of tax measures alone is quite lengthy. Something that caught my eye is that the Offshore Receipts in respect of Intangible Property (ORIP) rules will be repealed when the Undertaxed Profits Rule (UTPR) comes into force.

ORIP out - UTPR in

The ORIP rules were introduced in the Finance Act 2019 with effect from 6 April 2019. Broadly speaking, they impose an income tax charge in respect of “UK-derived amounts” on persons not resident in the UK or a territory with which the UK has a double tax treaty with a non-discrimination clause. “UK-derived amounts” are gross receipts (whether capital or income) in respect of IP rights used in connection with the provision of goods or services in the UK. There are exemptions from the charge, including where the UK-derived amounts are subject to a certain minimum level of taxation. 

The Chancellor announced that the ORIP rules would be abolished “in respect of income arising from 31 December 2024” and this repeal is to “take place alongside the introduction of the Pillar 2 Undertaxed Profits Rule” which the Autumn Statement confirms will be introduced for accounting periods beginning on or after 31 December 2024 (previously, it had been announced that the UTPR would be brought in with effect “no earlier than” such date; the draft legislation for the implementation of the UTPR as updated on 27 September 2023 had not set a commencement date, but would allow the provisions to be brought into force by statutory instrument). The Autumn Statement highlights that it is important for the UK’s implementation to remain in step with other jurisdictions’ and the commencement date that it envisages for the UK’s implementation of the UTPR would seem to comply with that (the EU’s Pillar 2 Directive also requires implementation of the UTPR from 31 December 2024). 

The policy costings envisage a net revenue gain from the implementation of the UTPR and the abolition of ORIP, being £260m in 2025-26, £420m in 2026-27 and rising to £490m in 2028-29. Overall, these figures seem rather high, and the costings document acknowledges areas of uncertainty which “relate to estimating jurisdictional profit and tax for foreign headquartered groups, the behavioural responses of groups and other jurisdictions and the future distribution of revenues and profits that are subject to a low level of taxation”. For me, a related question is how the UTPR is expected to generate increasing returns over time, given that the rule is intended as a backstop – meaning that its revenues should decrease as more jurisdictions implement an IIR and/or QDMTT – although the jump from 2025-26 to 2026-27 could be explained by the operation of the temporary safe harbour that eliminates a UTPR top-up in respect of the parent jurisdiction, provided that that jurisdiction imposes corporate income tax at a rate of at least 20%. But this would then seem to assume that, by the time the temporary UTPR safe harbour expires, parent jurisdictions (the US being a notable example) have not taken measures to prevent UTPR charges and acquiesce to tax in respect of operations in their jurisdiction being collected elsewhere. To me, this does not seem particularly likely. 

Other business tax measures

Other business tax measures that caught my eye were that temporary full expensing as announced at the Spring Budget (see my earlier blog) will be made permanent (or as permanent as it can be with a general election looming on the horizon). This will be legislated for in the Autumn Finance Bill 2023 to be published before the end of this year. 

A Technical Note on the “Energy Security Investment Mechanism” or “ESIM” has been published which sets out the threshold below which oil and gas prices would have to fall in order for the Energy (Oil and Gas) Profits Levy to be disapplied (although further legislation would have to be introduced to actually give effect to this disapplication, and the Technical Note commits the government to doing that). 

In respect of the Electricity Generator Levy, a new exemption will be introduced. This would cover receipts from a new electricity generating station or additional receipts resulting from the expansion of an existing generating station where the substantive decision to create the new station or expand an existing station is made on or after 22 November 2023. A Technical Note has been published for comment; it envisages that draft legislation for inclusion in “an upcoming Finance Bill” (so probably not the Autumn Finance Bill 2023) will be published as soon as possible. 

The Chancellor also confirmed that the research and development tax relief regime and the RDEC regime would be merged from April 2024. The Autumn Statement lists this as a measure which would have the benefit of simplifying the tax system “by combining the best parts of both reliefs under a common set of rules and removing the situation where companies have to transition between the SME and RDEC schemes”. I suspect my colleague, Kasim Mehmood, will comment on this over the next few days.