The UK has introduced notification requirements for UK entities of groups required to file country by country reports (CbCR). These apply for financial years beginning from 1 January 2016 and have a 1 September 2017 deadline, and so require immediate attention from businesses.
CbCR – the mechanics
Businesses falling within the CbCR rules must submit one report for the group. This will typically be made by the parent company, although under certain circumstances a surrogate might be nominated.
For example, a surrogate might be used when the parent territory does not have CbCR requirements in place, or does not have sufficient exchange of information arrangements with other tax authorities. Where a surrogate is not used in these circumstances, local filing may be required.
Where a local filing is not required as submission of the CbC report is performed by another group company, the local tax authority will gain access to the report directly from the tax authority of the filing territory. In order to do so, they will need to know where the report has been filed.
Notification – new UK requirements
Entities falling within CbCR need to let their tax authorities know where that filing will be made. At the end of March 2017, the UK introduced notification requirements for UK taxable entities falling within CbCR. These companies must notify HMRC of:
- The name of the company or partnership making the filing
- That entity’s unique tax reference number, and
- The territory where filing will be made.
Only one notification is required for group entities within the UK, so one company may file the notification and include details (the names and tax reference numbers) of the other relevant UK entities, including partnerships and branches or permanent establishments. If a UK entity is filing the CbC report this should also be notified to HMRC as part of this process.
HMRC has set out brief guidance on the notification format: with a preference for a spreadsheet sent to a dedicated email mailbox. The deadline for notification will usually be the end of the accounting period for which the report is being prepared. For the first period (ie the first one starting on or after 1 January 2016) the notification deadline has been extended to 1 September 2017.
The notification deadline should not be confused with the CbCR filing deadline, which in the UK is twelve months after the year end (as for the corporation tax return).
Notification – other territories
A number of countries have introduced CbCR. Most of these have brought in notification requirements. Those bringing in CbCR from 2016 have generally extended their notification deadline, although not always as far as the UK has done. Some have not extended it at all.
Generally, the same kind of information will be required for entities in these territories as for the UK notification. However, the rollout of notification requirements is still in progress and expectations in each location should be kept under regular review.
Notification – key issues
The information required for notification is not onerous. However, businesses should consider:
- Whether they are part of a group which falls within CbCR; the UK uses a €750m annual turnover threshold while some territories have converted this into local currency. Foreign exchange movements will have an impact.
- Which entity will make the CbCR filing? Does its territory have a CbCR requirement itself and can/will its tax authority share the information with other relevant fiscal authorities? If not, should a group company elsewhere be used as a surrogate?
- Which local entity in each territory will make the notification, if a consolidated notification can be made.
- When each filing is due.
- If the business has regional head offices, whether they, the parent or the local businesses should manage the notification process.
These notification considerations will sit alongside issues groups will need to address for the country by country report: HMRC has also updated the requirements for the CbC report itself.
Your next steps
If your business falls within CBCR, you will need to ensure that appropriate notification is made to HMRC and that you have the right information to do so. If you have responsibility for other territories, the requirements for notification in these countries should also be addressed. For help and advice, please get in touch with Anton Hume or Paul Daly.
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