Country by Country Reporting in the UK: New Annual Obligation to Notify
On 30 March, the UK Government announced some significant changes to its rules on country by country (CbC) reporting that reflect recent OECD and EU developments. These changes come into force on 20 April.
- Certain partnerships are brought within the reporting obligation.
- UK entities in non-UK parented multinational groups must notify HMRC each year which group entity is going to file the CbC report, and give details of all the UK entities in the group.
- Ultimate group parents filing a CbC report in the UK must also include details of all UK entities in the group.
- UK entities that are required to file a CbC report must request from the group parent details about the whole group, and if that information is received, must make a full CbC report in the UK. If the information is not received, the UK entity must file a report relating to the UK entities in the group only.
CbC reporting in the UK
The requirement for multinational groups to deliver a report of revenue, pre-tax profit and taxes paid in each country in which they operate was introduced in the UK, following BEPS Action 13, with effect from 1 January 2016. The filing deadline for the first CbC report to be delivered under UK legislation is 12 months after the end of the first period to which CbC reporting relates.
The primary responsibility for filing a CbC report with the UK tax authorities (HMRC) lies with the ultimate parent of the group, which must also notify HMRC of the names and unique taxpayer references for all of the MNE group’s UK entities by the later of the end of the period covered by the CbC report (or for the first notification, 1 September 2017 if later).
In certain circumstances the responsibility shifts to the UK entity/entities in the group, who are required to make a "local filing" with HMRC. These circumstances are: (a) the country of residence of the ultimate parent does not require it to file a CbC report, (b) that country has an exchange of information agreement with the UK but not specific arrangements in respect of CbC reports, or (c) information exchange arrangements have been entered into but are not operating effectively. In such a case, the UK entity must request from its ultimate parent all the information it would need in order to complete a full CbC report, and provided it receives that information before the filing deadline, file the report with HMRC. If it does not receive the information in time, the UK entity must inform HMRC and must file a report in respect of the UK entities in the group only. The exceptions to this rule are where another group entity has filed the report with HMRC or where a report containing the necessary information has been filed in another country that has entered into information exchange arrangements with the UK, subject in each case to the UK entity giving details to HMRC of the entity that has filed the report, the jurisdiction it was filed in (if not the UK) and the date of filing.
Any UK entity that is not an ultimate parent must tell HMRC, annually, which entity in the MNE group will file the CbC report and where, and provide the names and unique taxpayer references for all of the MNE group’s UK entities. The deadline for doing so is the end of the period covered by the CbC report. However, for the first notifications to be made under this rule, the deadline is the later of the last day in the period and 1 September 2017.
In accordance with OECD guidance, UK partnerships that are parent entities of multinational groups must file CbC reports (as well as other group entities that are required to file).