Insights

A significant step in the OECD's Base Erosion and Profit Shifting (BEPS) Project is addressing tax challenges arising from the digitalisation of the global economy. With over 135 jurisdictions joining a landmark plan to modernize the international tax system, the Global Anti-Base Erosion Rules (GloBE) have become a crucial element of this framework. These rules ensure that large multinational enterprises with consolidated annual revenues exceeding €750 million pay a minimum tax of 15% on their profits in each jurisdiction they operate in.

Implementation of Pillar II in the UK

As part of the UK’s commitment to Pillar II, the government is incorporating the GloBE Rules into its domestic legislation through the introduction of two new taxes – the Multinational Top-up Tax (MTT) and the Domestic Top-up Tax (DTT) - applicable for accounting periods beginning on or after 31 December 2023.

These measures will require affected businesses to prepare for reporting and compliance requirements with both MTT and DTT in the UK (in addition to managing Pillar II obligations across other jurisdictions).

UK Reporting and Compliance Requirements

Multinational businesses falling under the scope of Pillar II, must adhere to the new UK reporting and registration requirements if it has at least one member in the UK even if they do not have any MTT or DTT liability. Companies must:

Register with HM Revenue & Customs (HMRC) to report Pillar II taxes.

Submit an annual Self-Assessment return to report MTT and DTT liabilities.

File an annual GloBE Information Return (GIR) or provide notification of filing an overseas return.

HMRC’s commitment

HMRC is currently developing an online service to streamline compliance with the new Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT) requirements. This service will be rolled out in stages.

The first stage, which allows businesses to register for the new taxes, is now available and businesses in the scope of Pillar II must register within six months from the end of the accounting period in which their group qualifies under the GloBE rules (e.g., by 30 June 2025, if the first qualifying accounting period ends on 31 December 2024).

In addition, HMRC is preparing to release a comprehensive manual on the MTT and DTT. On 12 September 2024, HMRC launched a public consultation on the technical guidance for the legislation implementing Pillar II in the UK. The consultation remains open until 23 October 2024, after which the final version of the manual will be published in autumn 2024. This manual will provide essential details on compliance, tax calculations, and the application of these new taxes.

With the introduction of MTT and DTT in the UK, multinational groups with UK presence must prepare for these upcoming changes and stay informed about the latest updates from HMRC. In this respect, we are closely monitoring these developments and are ready to assist you in navigating this evolving tax landscape. Stay tuned for more updates and reach out to us for any assistance with your needs.