Change to HMRC Country-by-Country notification requirements

HMRC have made changes effective from 26 July 2023 to the notifications required to be made by companies within the Country-by-Country (CbCR) regime where a full CbCR report is not going to be filed in the UK.

The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 require certain multinational enterprises (MNEs) to report annually to HMRC details of revenue, profit, taxes and other measures of economic activity for each tax jurisdiction in which they do business.

CbCR reporting was introduced as part of a wider project to promote tax transparency between multinational businesses and tax authorities and to help taxing authorities (not just in the UK) to assess tax risks.

International parented groups with at least one company based in the UK and UK-headed MNEs with a consolidated group revenue of €750 million or more are required to submit a CbCR report. The CbCR reporting deadline is (in the UK) 12 months after the year end.

Only one CbCR is required for the worldwide group. However, in 2017 HMRC introduced further legislation which required UK companies to submit two annual notifications to HMRC and this is the subject of the recent change.

The first notification was of the groups intention to file a CbCR report, and to indicate whether the CbCR report would be filed in the UK or by another group entity in an overseas territory. This notification had to be submitted to HMRC before the end of the accounting period. This notification is no longer required to be made from 26 July 2023.

The Regulations will continue to require relevant UK entities to provide annual country-by-country reports on their activities to HMRC, but they will no longer be required to notify HMRC before providing a report. 

Where the CbCR is submitted outside the UK, in certain circumstances, a notification to HMRC is required in respect of an exception from the requirement to file a CbCR report in the UK. Where relevant, this notification is still required to be submitted to HMRC within 12 months after the end of the accounting period to avoid £300 late filing penalty.

HMRC have said that removing the notification requirement will release HMRC resource, allowing staff to address CbCR queries and focus on the quality of the report data and multinational entities will be relieved of the administrative task of submitting notifications.

The format of the notification of exception to the filing obligation is currently unclear. HMRC had previously provided a template for this purpose. Current guidance provided now sets out the information to be included in the notification, which should be sent to a specified HMRC email address. 

If you have any queries regarding the filing of CbCR reports or the notification of exception to the filing obligation, please contact Simon Crookston or Andrew Hawley.