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HMRC finalises rules on country-by-country reporting

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02 Mar 2016

HM Revenue & Customs (HMRC) has finalised the rules on country-by-country reporting in the UK which apply for accounting periods beginning on or after 1 January 2016.

The new rules give effect to the Base Erosion and Profit Shifting (BEPS) Action Plan adopted by the Organisation for Economic Development (OECD) and G20 countries in respect of the provision of information concerning high-level transfer pricing and other BEPS related matters.  The ultimate aim is to improve transparency between multinational businesses and tax authorities to help identify tax avoidance.

There will now be a statutory requirement for UK headed multinational enterprises or UK sub groups of multinational enterprises to make an annual country-by-country report to HMRC.  The rules apply to any UK resident ultimate parent entity of a multinational enterprise where consolidated group turnover is €750m or more in a 12 month accounting period.  The rules also apply to the top UK entity of a multinational enterprise when it is not the ultimate parent entity of the multinational enterprise and the ultimate parent entity is resident in a country that either doesn’t require country-by-country reporting or doesn’t exchange reports with HMRC in accordance with an effective multilateral competent authority agreement.  

The report will need to contain the following for each tax jurisdiction in which they do business:

  • the amount of revenue, profit before income tax and income tax paid and accrued; and
  • their total employment, capital, retained earnings and tangible assets.

Those multinational enterprises will also be required to identify each entity within the group doing business in a particular tax jurisdiction and to provide an indication of business activities within a selection of broad areas which each entity engages in.

Country-by-country reports will be automatically shared by relevant countries in accordance with international agreements governing the exchange of information.

Further information is available on the HMRC website.  Our Governance in brief publication is available here.

*Update 30/03/2016 - Regulations have been made, The taxes (base erosion and profit shifting) (country-by-country reporting) regulations 2016 (link to Regulations) which come into force on 18 March 2016.  The OECD has also released a standardised electronic format for the exchange of CBC reports between jurisdictions.  This and a user guide can be accessed in the OECD website here.*

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