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HMRC internal manual

International Exchange of Information Manual

Country-by-Country reporting: Groups in scope and entities that must report

The UK rules use many terms and definitions that are taken from the OECD guidance and that guidance should be checked when completing a CbC report.

For an entity to be in scope for CbC reporting for any period it must be part of an MNE group which passes the following tests:

  • It must include 2 or more enterprises that are resident for tax purposes in different jurisdictions
  • It must have had consolidated group revenue of €750 million either as shown in its Consolidated Financial Statements, or as would have been shown if it had been required to produce them, in the previous period

The second part of the test relates to the MNE group’s revenue whether or not that group is headed in the UK.

Where an MNE group is in scope obligations are imposed on:

The Ultimate Parent Entity (UPE) – which has the same meaning as the OECD model except that it must be tax resident in the UK if it is a company or it must be formed or organised under UK law if it is a partnership. The OECD model definition for UPE is “…a Constituent Entity of an MNE Group that meets the following criteria:

(i) it owns directly or indirectly a sufficient interest in one or more other Constituent Entities of such MNE Group such that it is required to prepare Consolidated Financial Statements under accounting principles generally applied in its jurisdiction of tax residence, or would be so required if its equity interests were traded on a public securities exchange in its jurisdiction of tax residence; and

(ii) there is no other Constituent Entity of such MNE Group that owns directly or indirectly an interest described in subsection (i) above in the first mentioned Constituent Entity.”  or

United Kingdom Entity (UKE) – where there is no UPE of the MNE group in the UK, the regulations impose obligations on the top entity which is resident for tax purposes or which has a permanent establishment in the UK, in the circumstances described in [para 6] of this guidance.

The definition of UKE contained in regulation 5 of the UK regulations is *“…**a Constituent Entity (“UKE”) in respect of which conditions A and B are satisfied. *

*(3) Condition A is satisfied where UKE is resident in the United Kingdom for tax purposes or has a permanent establishment in the United Kingdom. *

*(4) Condition B is satisfied where there is no other Constituent Entity of the MNE Group— *

(a)resident in the United Kingdom for tax purposes; or

(b) which has a permanent establishment in the United Kingdom,

and which is required to prepare Consolidated Financial Statements or would be so required if its equity interests were traded on a public securities exchange and such statements include or would include UKE.”