UK-based multinationals or UK subsidiaries of multinationals with a turnover of €750m (£585m) will have to submit a country-by-country report (CBCR) to HMRC on an annual basis outlining their tax obligations within 12 months of the relevant reporting period
Under the new rules, any UK-resident ultimate parent entity of a multinational company with a consolidated group turnover of €750m (£585m) or more will have to report a CBCR.
It applies to accounting periods commencing on or after 1 January 2016 and companies will have 12 months from the end of the relevant accounting period to file a report with HMRC.
There is also a requirement for the top UK entity of a multinational to file a CBCR, when it is not the ultimate parent entity (UPE) of the MNE and the UPE is resident in a country that either does not require CBCR or does not exchange reports with HMRC in accordance with an effective multilateral competent authority agreement.
The reports will need to include information detailing tax reports for each tax jurisdiction where they operate, including:
- the amount of revenue, profit before income tax and income tax paid and accrued; and
- their total employment, capital, retained earnings and tangible assets.
Affected mulitnationals 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 is involved.
Multinationals who fail to comply with the new rules will face penalties although details have not been finalised.
HMRC says the cost of updating systems to handle the new reporting facility will cost around £100,000 a year, while it expects to see a small upturn in tax revenue of between £5m to £10m a year as it expects ‘an improvement in compliance’.
Multinationals who fail to comply with the new rules will face penalties although details have not been finalised.
HMRC says the cost of updating systems to handle the new reporting facility will cost around £100,000 a year, while it expects to see a small upturn in tax revenue of between £5m to £10m a year as it expects ‘an improvement in compliance’.
The Policy paper - Country by country reporting – updated is available here