The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 contain detailed regulation on country by country (CbC) reporting. The regulations provide the detailed procedure for CbC reporting in line with the recommendations of the G20/ OECD project on base erosion and profit shifting and the template issued as part of the OECD report.

Legislation on country by country (CbC) reporting was included in the UK Finance Act 2015 and this legislation gave power to the Treasury to make regulations requiring multinational enterprises to prepare and send a CbC report to HMRC. Draft regulations were published for discussion on 5 October 2015 and following consideration of responses the regulations have been issued.

CbC reporting will be applicable for accounting periods beginning on or after 1 January 2016 for multinational enterprises falling within the scope of the regulations. Under the regulations any UK resident entity that is the ultimate parent of a multinational group with a consolidated group turnover of EUR 750 million or more must send in a CbC report. This takes effect for accounting periods beginning on or after 1 January 2016. The company must send in the report within twelve months of the end of the relevant accounting period.

The legislation also requires a UK entity in an MNE in certain situations to send in a CbC report even when it is not the ultimate parent company of the MNE. This may be required when the ultimate parent entity of the group is resident in a country that does not require a CbC report or does not exchange reports with HMRC under an effective multilateral competent authority agreement. The UK entity would then file a CbC report for all entities within the sub-group of which it is the top company. An exception to this requirement would apply if the results that the UK entity would file are already included in a CbC report that HMRC can obtain.

There is also a provision that permits multinational groups with a UK presence to voluntarily file a CbC report with HMRC in certain situations. This is permitted if the ultimate parent entity of the group is resident in a country that does not require a CbC report or does not exchange reports with HMRC under an effective competent authority agreement.

Penalties are specified in the regulations and MNEs must therefore file the report on time and exercise due care in the preparation of the CbC report. There is a right to appeal if penalties are imposed.