Country by Country Reporting

The Organisation for Economic Co-Operation and Development (OECD) recommended the introduction of new reporting requirements for multinational groups, with consolidated group revenue in excess of EUR750million, to combat international tax avoidance.

Accordingly, new legislation very recently implemented these reporting requirements in the UK, applying to accounting periods commencing on or after 1 January 2016.

The UK reporting requirements differ, depending on the ultimate parent company of the group. Where a UK company is the parent company and annual group turnover exceeds EUR750million, the UK parent must file a CbC (Country by Country) report to HMRC within 12 months of the end of the accounting period.

The CbC report must identify each group entity doing business in any particular country, describing the business activities each entity is engaged in and, for each country report all revenues, profits before tax and taxes paid and accrued; plus total employment numbers, capital, retained earnings and tangible assets.

The UK parent must also make a ‘Notification report’ to HMRC by the last day of the relevant accounting period (this was extended to September 1, 2017 only for accounting periods commencing on or after January 1, 2016). The Notification should state that it is the Ultimate Parent Entity responsible for filing the CbC report; and the names and tax references of all other companies contained within the group.

Where an overseas company is the parent company and annual group turnover exceeds EUR750million, the CbC report should be delivered to the overseas tax authority in the country of residence of the overseas parent.

Any UK group company must make a ‘Notification report’ to HMRC by September 1, 2017 or the last day of the accounting period in question confirming the name and taxpayer reference of the overseas parent company, and in which country it will submit its CbC report. It must also confirm why that UK company is exempt from submitting the CbC report, i.e. the overseas parent company is doing so; and the name(s) and tax reference(s) of all other UK entities which are part of the group.

In summary, UK parent companies, exceeding the turnover limit during their December 31, 2016 period end, must submit their CbC report to HMRC by 31 December 2017.

Any UK group company (non-parent) with an overseas parent, whose group’s turnover will exceed the limit during its December 31, 2017 period end, must submit a Notification report to HMRC by December 31, 2017.

AAB are fully versed in the necessary reporting obligations and well equipped to assist UK companies in either position. If you would like more information on this, please do not hesitate to contact Ruth MacNamee or your usual AAB contact.