Policy paper

Country by country reporting - updated

Updated 30 March 2017

Who is likely to be affected

Multinational enterprises (MNEs) with a UK presence.

General description of the measure

The measure introduces a new statutory requirement for UK headed MNEs, or UK sub groups of MNEs, to make an annual country-by-country report to HM Revenue and Customs (HMRC) showing for each tax jurisdiction in which they do business:

  • the amount of revenue, profit before Income Tax and Income Tax paid and accrued
  • their total employment, capital, retained earnings and tangible assets

MNEs will also be required to identify each entity within the group doing business in a particular tax jurisdiction and to provide an indication of business activities within a selection of broad areas which each entity engages in.

The obligation to file a country-by-country report has been introduced in 2 stages. The initial stage enabled regulations to be made and the regulations now being laid give effect to the scope and detail of the obligation.

Policy objective

This measure will require UK headed MNEs and enable non-UK headed MNEs to provide HMRC with information about global activities, profits and taxes. It will also require UK entities of foreign-headed MNEs to provide HMRC with information where those results wouldn’t otherwise be reported. This will help HMRC to better assess international tax avoidance risks. It is intended that the information reported by MNEs will be shared with other relevant tax jurisdictions so that they too can identify when MNEs have engaged in certain forms of base erosion or profit shifting activity.

Background to the measure

The government announced on 20 September 2014 that it would implement the country by country reporting (CBCR) template developed by the Organisation for Economic Co-operation and Development (OECD) as part of its project to strengthen international standards on Base Erosion and Profit Shifting (BEPS). The template is contained in the OECD’s October 2015 final package of measures for the BEPS project.

Draft regulations were published for consultation on 5 October 2015 and this measure is informed by the responses to that consultation.

Detailed proposal

Operative date

Country-by-country reports will need to be filed for all accounting periods starting on or after 1 January 2016 for MNEs that are in scope.

Current law

Legislation was introduced in Finance Act 2015 section 122(1), (4), (5) and (6), giving the Treasury the power to make regulations to require MNEs to provide HMRC with a country-by-country report.

Proposed revisions

The measure introduces a reporting requirement for any UK resident ultimate parent entity of an MNE with a consolidated group turnover of €750 million or more. It applies to accounting periods commencing on or after 1 January 2016 and companies will have 12 months from the end of the relevant accounting period to file a report with HMRC.

The measure also includes a requirement for the top UK entity of an MNE to file a CBCR, when it is not the ultimate parent entity (UPE) of the MNE and the UPE is resident in a country that either doesn’t require CBCR or doesn’t exchange reports with HMRC in accordance with an effective multilateral competent authority agreement. This local filing requirement will mean that the top UK entity of an MNE will file a CBCR covering all entities within the sub group of which it is head. There is an exemption if the results the UK entity would be required to file have already been included in a CBCR that HMRC can receive.

In addition, the measure includes a provision to allow MNEs with a UK presence to voluntarily file a CBCR with HMRC in certain circumstances; broadly speaking, where the ultimate group parent is resident in a country that either doesn’t require CBCR or doesn’t exchange reports with HMRC in accordance with an effective competent authority agreement.

The reporting requirement is supported by a penalty regime in the regulations to encourage MNEs to file on time and to take due care in the preparation of the report.

Summary of impacts

Exchequer impact (£m)

2015 to 2016 2016 to 2017 2017 to 2018 2018 to 2019 2019 to 2020
Negligible +5 +5 +10 +10

These figures are set out in table 2.2 of March Budget 2015 as ‘Corporation Tax: country-by-country reporting’, and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Statement 2014. The changes detailed in this tax information and impact note are expected to result in a further small increase in yield.

Economic impact

The measure is not expected to have any significant macroeconomic impacts. A small behavioural effect is expected as the requirement to supply this information leads to an improvement in compliance.

Impact on individuals, households and families

As this measure applies only to MNEs, it’s not expected to impact on individuals or households, nor on family formation, stability or breakdown.

Equalities impacts

As this measure doesn’t apply to individuals it’s unlikely that there will be adverse impacts on any group with protected characteristics.

Impact on business including civil society organisations

This measure will primarily affect UK-headed MNEs. It will provide the basis for an obligation for approximately 300 UK-headed MNEs to complete a template every year. This has reduced from the original estimate (published at Autumn Statement 2014) of 1,400 UK-headed MNEs, mainly because MNEs have been taken out of scope as a result of increases in the global turnover threshold above which MNEs are required to complete a template. There will also be obligations on approximately 100 UK resident subsidiaries or permanent establishments of non-UK headed MNEs who will be required to complete a template as a result of the local filing requirement. A further 100 UK constituent entities of non-UK headed MNEs will be required to complete a template for a short period, expected to be a year, until the heads of those MNEs start to report their results in their country of residence.

There is expected to be a negligible one-off cost in the first year as businesses will need to familiarise themselves with the new requirements, gather relevant information and provide training to staff. Businesses will also incur an annual on-going administrative burden associated with populating the template, however these annual costs are also estimated to be negligible. This has reduced from the original estimate of annual costs of £0.2m reflecting the fall in the number of MNEs as described above.

This measure is expected to have no impact on civil society organisations.

Operational impact (£m) (HMRC or other)

There will be a modest cost to HMRC from receiving and processing the reports and also from responding to requests to exchange information from tax authorities in other jurisdictions estimated at £100,000 for 2017 to 2018 and £200,000 a year thereafter.

Other impacts

The impact on the Ministry of Justice has been considered and is estimated to be negligible. No other impacts have been identified.

Monitoring and evaluation

There will be ongoing monitoring of information provided in CBCRs and exchanged with other jurisdictions.

Further advice

If you have any questions about this change, please contact Hugh Dorey on Telephone: 03000 585838 (email: hugh.dorey@hmrc.gsi.gov.uk) or David Smith on Telephone: 03000 577521 (email: david.b.smith@hmrc.gsi.gov.uk).


David Gauke MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.