Large companies and groups operating in the UK (either headquartered here or with a UK subsidiary) could be subject to various large business compliance regimes. Mimi Chan summarises the key rules that large groups need to be aware of.
UK-specific measures
Senior Accounting Officer regulations
If you are…
A UK-incorporated company (or part of a group of UK-incorporated companies) with aggregate turnover above £200 million and/or gross assets about £2 billion in the preceding financial year.
You need to…
Appoint a Senior Accounting Officer (SAO) who is ultimately responsible for creating and maintaining appropriate tax accounting arrangements – i.e. a framework of systems, processes, procedures and responsibilities that allow a company to calculate its tax liabilities with material accuracy.
Every year, in-scope companies must tell HMRC who their SAO is. The SAO must then certify to HMRC that the company had appropriate tax accounting arrangements throughout the financial year or, if not, identify the issues arising. The deadline coincides with the company’s accounts filing due date. If the SAO certificate covers a group with both PLCs and limited companies, the earlier deadline applies.
Separate penalties of £5,000 each can be imposed for late or incorrect certificates, failure to comply, or inadequate systems. These may be chargeable on the SAO personally.
Uncertain Tax Treatments
If you are…
A UK company in scope of the SAO regime.
You need to…
Notify HMRC of any “uncertain tax treatments” that you take in your tax returns (corporation tax, VAT, and income tax which covers amounts collected through PAYE).
A tax treatment is uncertain where a business believes that HMRC may disagree with its interpretation of the legislation, case law, or guidance, or where a provision is made in the financial statements to reflect that a different tax treatment is being applied.
Reporting is required where the tax advantage to the company is more than £5 million.
Global measures
Country-by-Country (CbC) Reporting
If you are…
A part of a multinational enterprise (MNE) group with consolidated revenue above €750 million in the previous financial period
You need to…
File a group CbC report annually. This sets out key elements of the financial statements for each tax jurisdiction where the group operates – for example revenue, taxes paid/accrued, employee numbers and tangible assets.
In most cases, the ultimate parent entity (UPE) must file the report in its own tax jurisdiction. However, if all upstream group entities are resident in countries that do not have CbC reporting requirements, the top UK entity must file a report with HMRC.
The reports are due within 12 months of the end of the year to which it relates. If your group is filing a CbC report in another jurisdiction, the UK members of the group must notify HMRC (by the same deadline) that the group is filing a CbC report elsewhere and therefore not filing it with HMRC.
Certain jurisdictions, such as the EU and Australia, have implemented public CbC requirements. MNEs with a presence in those jurisdictions will need to make their CbC data available to the public – for all jurisdictions, not just those with public CbC requirements. The UK currently has no such requirements, but as a result of the above, a group’s UK CbC data may need to be shared publicly by other members in the group.
Master file and local file
If you are…
A company that is in scope of CbC reporting
You need to…
Maintain your transfer pricing documentation in master file/local file format.
The master file provides an overview of your group’s global business operations, transfer pricing policies and global allocation of income and economic activity. The local file supplements the master file and provides details relating to specific intercompany transactions involving UK entities (including any UK-to-UK transactions).
Currently, there is no requirement to submit the master or local files to HMRC annually. However, HMRC can request transfer pricing documentation generally (including master & local files) with just 30 days’ notice.
If you are not within CbC reporting, then the extent to which you need to maintain formal transfer pricing documentation will depend on your size for UK transfer pricing purposes (and whether you fall within the Small and Medium Enterprises exemption). In Summer 2025, HMRC concluded three consultations on international tax matters including transfer pricing. We are currently awaiting further announcements regarding potential changes to the transfer pricing requirements.
OECD Pillar Two Global Minimum Tax (“Pillar Two”)
If you are…
A part of a domestic group or a multinational enterprise (MNE) group with consolidated revenue above €750 million (i.e. is within the CbC reporting regime) in at least two of the four preceding financial periods
You need to…
Calculate your GloBE (Global Anti-Base Erosion) effective tax rate (ETR) for each jurisdiction in which your group operates, and pay a top-up tax if the ETR is less than 15%.
Pillar Two rules are complex and jurisdictions have implemented the rules to different extents. In most cases, responsibility for calculating and reporting top-up taxes lies with the ultimate parent entity (UPE). However, similar to CbC reporting, if all upstream entities are resident in jurisdictions that have not implemented Pillar Two, the top UK entity must take on these responsibilities.
Thresholds in other jurisdictions
With CbC reporting, Master file/Local file requirements and Pillar Two, the UK uses the default threshold of €750 million for annual revenues. Your group should monitor the local thresholds and requirements in the other jurisdictions that it operates in as some jurisdictions operate thresholds that are lower or that are stated in local currency.
And finally…
Tax Strategy requirements
If you are…
A part of an MNE group that is within CbC reporting or part of a domestic group that is within SAO (see below).
You need to…
Publish a tax strategy which sets out:
- How the group manages UK tax risks
- The group’s attitude to tax planning
- The level of risk the group is prepared to accept for UK taxation; and
- How the group works with HMRC.
Once the group has published its first tax strategy, it must update its strategy annually, before the end of each financial year. The annual strategy must be published online and be freely accessible by the general public.
There has been some confusion on who exactly falls within the Tax Strategy requirements. It was previously understood that groups that were within CbC reporting or SAO (or potentially both) needed to comply with the Tax Strategy requirements. HMRC has since updated their guidance to make it clear that these tests are mutually exclusive:
- If you are part of an MNE group, then you apply the CbC reporting thresholds to determine if you fall within the Tax Strategy rules
- If you are not part of an MNE group (i.e. your group operates wholly within the UK), then you apply the SAO thresholds to determine whether you fall within the Tax Strategy rules.
You may for example be a part of a group that is sufficiently large in the UK so as to fall within the SAO regime, but not large enough worldwide to fall within CbC reporting. In that case, your group does not need to publish a tax strategy. However, it is best practice for large groups to still maintain a policy/strategy internally.
How we can help
Where businesses do not comply with these requirements or inadvertently make inaccurate disclosures, they may incur significant financial penalties and reputational damage. If you are unsure of whether your business is fully compliant with all the regulations and you would like to discuss further, please get in touch with Mimi Chan.
