On May 20, UK HMRC issued registration notice for Pillar 2 top-up tax.
HMRC issued notice and guidance explaining how to register for pillar 2 top-up taxes in UK, what must be provided, and how to notify HMRC of any reporting related changes.
Follows UK HMRC Jul. 2023 issued multinational top-up tax draft rules, see #179760.
Registration
There are two Pillar 2 top-up taxes in the UK, these are domestic and multinational.
Groups must register if have at least one entity located in the UK, consolidated group annual revenues of €750mn or more in at least 2 of previous 4 accounting periods.
If group only has entities listed in UK, must register to report domestic top-up tax, if group has entities located both inside and outside UK, register to report for both taxes.
The taxes operate at group level, filing member must register on behalf of all group members and will be the ultimate parent entity by default, or one nominated by it.
Must register if group meets criteria, even if it does not have to pay any top-up tax.
Registration must take place no later than 6 months after the end of the group's first accounting period that started on or after Dec. 31, 2023.
Returns
Once registered, group must submit first returns no later than Jun. 30, 2026, if first accounting period reported for Pillar 2 top-up taxes ended on/before Dec. 31, 2024.
18 months after the last day of the group's accounting period, if the first accounting period reported for Pillar 2 top-up taxes ended after Dec. 31, 2024.
Next Steps
Once registered, can use Government Gateway and user ID and password to sign in and manage account, and UK HMRC is delivering this service on a phased approach.
It will release the tools needed to submit returns before the due date for reporting.
Jul. 2024 New Guidance
On Jul. 11, 2024, UK HMRC published new guidance entitled How to prepare for the Multinational Top-up Tax and the Domestic Top-up Tax, looking at the requirements.
UK and more than 135 other countries agreed, as part of OECD Inclusive Framework, to a two-pillar solution to reform the international corporate tax framework in response to the challenges of digitization, to provide for a fairer and more equal tax treatment.
Pillar 2 of this solution, which is now known as the Global Base Erosion (GloBE) rules, requires a group with consolidated annual revenues of more than €750 million to pay a minimum of 15% tax on all its profits, in each of the jurisdictions in which it operates.
As part of UK adoption of rules, UK GVT announced 2 new taxes to apply to periods on or after Dec. 31, 2023, Multinational Top-up Tax (MTT), Domestic Top-up Tax (DTT).
The information provided is designed top help affected firms prepare for the new rules.
All the affected businesses will need to prepare for complying with both MTT and DTT in the UK, as well as for a wider adoption of Pillar 2 requirement in other jurisdictions.
Work at the OECD is ongoing to ensure implementation of Pillar 2 rules is coordinated to achieve a better tax certainty for affected businesses and reduce compliance costs.
UK HMRC is developing an online service to enable businesses to meet the MTT and DTT obligations, which will include ability to register, file returns and make payments.
One member of the group must be solely responsible for registering and complying with both the new taxes, and this will be the group’s ultimate parent entity, unless the business has nominated a different UK or non-UK member to be responsible for this.
Jul. 19, 2024 Updated Version
On Jul. 19, 2024, UK HMRC published an updated version of the guidance to reflect the latest timelines on how register for the new taxes; registration deadline is 6 months from the end of the accounting period in which the group became a qualifying group.
Aug. 6, 2024 Guidance Update
On Aug. 6, 2024, UK HMRC published a further updated version of the guidance.
It noted that most sections of the guidance document have now been updated.
Oct. 2024 Multinational Top-up Tax
On Oct. 30, 2024, UK HMRC issued a tax information and guidance note which describes the UK's adoption of the multinational top-up tax undertaxed profits rule.
These taxes are UK's adoption of the Pillar 2 Global Anti-Base Erosion rules, the measure HMRC describes extends the taxes to give effect to undertaxed profits rule.
The undertaxed profits rule ensures that any top-up taxes that are not paid under another jurisdiction's Pillar 2 rules are brought into charge in the UK.
Will affect groups with annual global revenues exceeding €750mn that have business activities in the UK, measure to be monitored through data collected from tax returns.
Untaxed profits rule effective for accounting periods beginning on/after Dec. 31, 2024.
