UK CBCR reporting update concerning foreign parented groups

Fri 01 Sep 2017

UK entities within the scope of country by country reporting (CBCR) for the first reporting periods to which the rules apply, will have either met or be preparing to meet the notification deadline. For those UK entities which have non-UK ultimate parents, the notification requires consideration of which group entity will file the CBCR report in an acceptable jurisdiction.

Even if another group entity is expected to file a relevant CBCR report, the obligation to file a CBCR report in the UK remains with the notifying ‘UK entity’ until that other group entity has filed the report and (if filed in another jurisdiction) the information exchange agreement with the UK is operating effectively.

HMRC has advised us that UK entities must make their best assessment of which entity in the group will make the relevant CBCR filing and make their notification on that basis. If the assessment ultimately proves incorrect it is acceptable to subsequently inform HMRC of the changes before the filing deadline.

HMRC’s schedule of tax information exchange agreements in force between the UK and other jurisdictions, and those signed but not yet in force are available at this link.  However, that webpage has not, at the time of writing, been updated for the agreement with the US signed on 16 August.  This is evidenced on the IRS website.  A ‘UK entity’ of a US parented group, whose US parent intends to file a CBCR report in the US covering the reporting period and figures relevant to the UK part of its group, could therefore notify HMRC to that effect.

Background to the notification obligation

The deadline for submitting a notification to HMRC for those within the scope of the UK rules when the rules first apply, was or is:

• 1 September 2017 for all companies with reporting year ends ending on or between 31 December 2016 and 31 August 2017;
• The year-end dates for those companies with reporting year ends of 30 September 2017, 31 October 2017 and 30 November 2017.

Depending on the group’s characteristics the notification must follow one of the following formats:

• If the entity is the UK ultimate parent entity responsible for filing country by country reports, the notification must state that fact.  The notification must also include the names and tax references of all the parent entity’s constituent entities that are UK tax resident, have a permanent establishment in the UK or are ‘partnerships’ (as defined).
• If another UK ultimate parent entity of the group has provided the notification, the name of that other ultimate parent and the date it notified HMRC must be provided.
• If there is no UK ultimate parent entity making the notification, any ‘UK entity’ of the group must submit a notification giving the following information:
  • Whether or not reporting exceptions A (another constituent entity of the multinational entity (MNE) is expected to file a report with HMRC by the UK reporting deadline that would include the notifying company’s figures) or B (another MNE constituent entity is expected to file a report in another jurisdiction before the UK reporting deadline that would include the notifying company’s figures) apply. In the case of the CBCR report being filed in another jurisdiction, the other jurisdiction must have entered into a CBCR information exchange agreement with HMRC and there cannot have been a notification to the company that this agreement is not operating effectively.
  • If exceptions A of B apply, the notification must provide the name of the reporting entity, the date the notification was made and (if relevant) the jurisdiction in which it is expected the report will be filed.
  • The names and tax references of the MNE constituent entities of the UK entity that are UK tax resident, have a UK permanent establishment or are partnerships (as defined).

A ‘UK entity’ (UKE) for this purpose is a UK tax resident entity or UK permanent establishment, for which no other UK tax resident entity or permanent establishment is required to prepare consolidated financial statements that include UKE, or would be required to if its equity interests were trade on a public securities exchange.  For a further discussion of your group’s CBCR and other tax reporting obligations please contact a member of the Mazars corporate tax team.