As part of an international effort to clamp down on tax avoidance, certain companies are now required to file annual Country By Country (CBC) reports. These show how key financial measures arose in the year on a territory by territory basis. The aim is to demonstrate where the group’s profits actually belong and so enable local tax authorities to clamp down on the sort of corporation tax avoidance that involves shifting profits from high tax to low tax jurisdictions.
The reporting requirement applies to members of groups with members in the UK and overseas with global income of €750 million or more. This means that even small UK companies can be caught if they are in a much larger group, so UK companies with overseas parents need to understand the structure and size of the wider group. Without this overview they won’t be able to tell if they are within CBC reporting.
There is a reporting exemption where the UK company’s data is included in a report filed by another group member with their own tax authority. This only applies though if the UK has agreed to exchange information with the territory where the report is filed. Even if the exemption applies, the UK company must still notify HMRC each year that it is included in another company’s report, using a specified format, and it must confirm with HMRC when the report has been filed.
Companies affected by CBC reporting are also required to publish their tax strategy on line annually. Also, if the group has a significant UK presence (total group UK turnover over £200 million or assets over £2 billion) the UK companies are required to appoint a Senior Accounting Officer with responsibility for ensuring that there are robust systems in place for dealing with tax obligations.
It’s worth getting this right because there can be significant penalties for non-compliance. Contact Ensors’ corporate tax team if you need assistance.