The Chancellor has secured a key agreement with G7 finance leaders on the future of the global minimum tax, marking a significant step in the fight against aggressive tax planning and
avoidance by multinational corporations.
In a major win for UK businesses, the controversial Section 899 has been removed from the U.S. "One Big Beautiful Bill." This clause could have imposed substantial additional tax burdens on UK firms. The decision follows strong concerns raised by the business community, which the Chancellor, Rachel Reeves, acted on swiftly by pledging to work with international partners toward a negotiated solution.
The new G7 agreement clarifies how the global minimum tax rules will interact with the U.S. tax system, aiming to reinforce a common goal: to curb tax avoidance by multinationals and create a more stable, transparent international tax framework. With Section 899 now withdrawn, talks between the UK and U.S. can proceed without the threat of retaliatory measures looming over discussions.
Chancellor of the Exchequer Rachel Reeves said: “I will always represent the best interests of British businesses on the world stage. Today’s agreement provides much-needed certainty and stability for those businesses after they had raised their concerns.
“The G7 agrees there is work to be done in tackling aggressive tax planning and avoidance and ensuring a level-playing field. The right environment for this work to happen is without the prospect of retaliatory taxation hanging over these talks, so the removal of Section 899 is welcome.”
This agreement supports the government’s wider Plan for Change, aimed at boosting business confidence, encouraging investment, and supporting job creation across the UK. It also follows the recent launch of the Prime Minister’s Trade Strategy, which outlines new trade priorities and builds on recent deals with India, the EU, and the U.S.
The G7 has committed to progressing work on Pillar 2 of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), which sets out a global minimum corporate tax to combat tax avoidance. The latest agreement aims to uphold the integrity of Pillar 2 while accommodating concerns raised by the U.S. about alignment with its own minimum tax regime.
Under the new understanding, the G7 will explore how both systems can co-exist without undermining the core goals of fairness and preventing tax base erosion. This approach will be further developed within the wider Inclusive Framework, which includes over 140 countries and jurisdictions.
The UK government will continue to consult with businesses and engage internationally to advance the agreed proposal, safeguarding the country’s position in global tax discussions while ensuring a stable, predictable environment for British enterprises.
Rain Newton-Smith, Chief Executive, CBI, said:
“The US commitment to drop retaliatory tax measures proposed in the One Big Beautiful Bill removes a major source of uncertainty for UK-headquartered multinationals. The CBI has been clear - there are no winners in an economic standoff. Avoiding disruption to transatlantic investment, financial flows and jobs benefits both the US and UK economies.
“While uncertainty remains around the Bill’s final passage and other potential Congressional actions later down the line alongside the UK’s Digital Services Tax under scrutiny - the UK government has rightly defended British business interests and our national sovereignty. HM Treasury’s handling of a challenging negotiation process stands out for its openness and sustained engagement with industry.
“Looking ahead, global tax rules must now be rebalanced through multilateral agreement while ensuring UK companies remain competitively positioned. This is a pivotal opportunity for the OECD to deliver a genuinely simpler, fairer regime - one that goes much further in reducing excessive compliance burdens and upholds a level playing field for all.” Photo by stevepb, Wikimedia commons.