Recently, the U.K. tax authority, Her Majesty's Revenue and Customs (HMRC), published updated guidance regarding the country-by-country reporting (CbCR) requirements for multinational enterprises (MNEs). The amendments consider updated guidance from the Organisation for Economic Co-operation and Development (OECD) and namely include:
- Extending the original scope of CbCR requirements to partnerships (originally announced in August 2016);
- Requiring a U.K. entity with a local obligation to file a U.K. CbC report to ask for the information necessary to complete a full CbC report (for the whole group) and aligning the local filing requirements with the OECD model; and
- Introducing a requirement for a U.K. entity in each MNE group to communicate on an annual basis to HMRC which entity from within the MNE group will file the CbC report, in which jurisdiction they will file, and the names and unique taxpayer references of all the U.K. entities of the group.
Including partnerships in the scope of CbC reports
Since the introduction of CbCR through the Taxes Regulations 2016, the OECD has made certain amendments and clarifications as to the scope of the entities included in the measure. Specifically, this new amendment now clarifies that partnerships should be included as reporting entities for the purposes of CbCR.
Alignment of local filing requirements to the OECD model
The amendments also make a minor adjustment to align the U.K.’s local filing requirements with the OECD model. Local filing will only be required if the parent jurisdiction of the foreign MNE has entered an international agreement that allows for exchange of information but has not entered into specific arrangements to exchange CbC report.
In addition, the amendment also introduces a requirement for the top U.K. entity caught by the local filing rules to ask its parent entity for the information it would need to be able to file a full CbC report for the whole group. If the parent entity refuses, the U.K. entity must tell HMRC of the refusal and file a CbC report covering all entities within the subgroup of which it is the head.
Annual notification scope and deadlines
There is now a requirement that a UK entity that is part of a MNE within the scope of CbCR to communicate to HMRC on an annual basis which entity in the MNE group will file the CbCR and where. The amendments also require that the names and unique taxpayer references for all the U.K. entities of the MNE group be provided (including U.K. resident companies, permanent establishments, and partnerships).
The notification should be made by the end of the period that is being reported. An exception applies for the first notification, which must be received by the later of the last day of the period covered by the report or 1 September 2017.
To avoid duplication, the ultimate parent entities (UPE) and the top U.K. entities (UKE) will not have to notify if another UPE or UKE of the MNE group has provided a notification that contains all the information that is required. HMRC must be provided with the identity of the UPE or UKE that has notified and the date that took place by the deadline.
There is no specific form for the notification, but HMRC has stated it would prefer this to be done in a spreadsheet form and a dedicated mailbox has been set up for this purpose: notification.cbcfiling [at] hmrc.gsi.gov.uk. Where the UKE and UPE are dealt with by HMRC Large Business, a copy of the notification should also be sent to the customer relationship manager (CRM).