Tax Talk: Large business compliance

What you need to know

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The need for transparency and accountability has led to new compliance and notification measures for large companies and groups. Mimi Chan summarises the key areas and upcoming proposals. 

UK-specific measures: 

Senior Accounting Officer regulations 

Affected businesses may need to appoint a Senior Accounting Officer (SAO) who is ultimately responsible for creating and maintaining the company’s tax accounting arrangements. The rules apply to any company (or combination of UK group companies) with a turnover above £200 million and/or gross assets above £2 billion in the preceding financial year. 

Every year the company 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. 

Tax Strategy publication 

Qualifying large UK businesses must publish their tax strategy online each year. This is usually included in the CSR documentation on the company’s website. 

The rules generally apply to any companies in the SAO regime, CbCR regime (see below), or both. The tax strategy must explain the following: 

  • The entity’s approach to corporate governance and risk management concerning UK taxation
  • The company’s attitude to tax planning
  • The risk level the entity is prepared to accept for UK taxation matters
  • The entity’s approach to dealings with HMRC


Once the company 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. 

Global considerations: 

Country by Country Reporting (CbCR) 

Under the OECD Base Erosion and Profit Shifting (BEPS) initiative, large multinationals with a UK presence (those with a consolidated group turnover of €750 million for the preceding year) must file a CbCR. In most cases, the ultimate parent entity must file the report in its own tax jurisdiction. However, if all upstream group entities are resident in countries that do not have CbCR requirements, the top UK entity must file a report with HMRC. 

The CbCR is an annual return showing key elements of the financial statements for each tax jurisdiction where business is carried out. 

If a UK company is responsible for filing the CbCR, it must file it with HMRC within 12 months of the end of the accounting period. Where UK companies are within the CbCR regime, but this is filed in another jurisdiction by a parent undertaking, HMRC should be notified by a representative member of the UK group, noting all the UK entities captured in that report.

Master File and Local File 

The OECD BEPS initiative also introduced standardised transfer pricing documentation. The Master File contains high-level information about global business operations and the group’s transfer pricing policy. The Local File provides more information on the local entity’s inter-company activities. 

Groups with fewer than 250 staff, and either annual revenue of under €50 million or a balance sheet total of under €43 million, are considered SMEs for transfer pricing purposes. Groups that do not meet these criteria will be subject to full UK transfer pricing legislation. 

At the moment, there are no Master File and Local File UK filing requirements. However, HMRC can request transfer pricing documentation with just 30 days’ notice. HMRC has recommended transfer pricing documentation conforms to the OECD 2017 Guidelines for Master and Local File requirements.   

In early 2021, HMRC consulted on three areas of transfer pricing documentation requirements. Its aim was to provide greater certainty for UK businesses, provide HMRC with better quality data, and align UK transfer pricing requirements with comparable tax administrations overseas and the recommendations of the OECD BEPS Action 13 final report. 

The key measures that were considered were:

  1. Implementation of Master File and Local File filing requirements, as recommended in the BEPS Action 13 final report.
  2. An Evidence Log, containing key reports and legal agreements (among others) to support the Local File data. This aims to reduce enquiry times by providing HMRC with more and better quality data at an earlier stage.
  3. An International Dealings Schedule (IDS). The IDS is already required in some jurisdictions, and usually includes financial dealings, restructuring, and transfer pricing methodologies. 


We await the Government’s response to the consultation. But we are moving towards an increased focus on transfer pricing documentation, so groups should consider reviewing their record-keeping and decide whether they need to make improvements.

Uncertain Tax Positions 

For returns (corporation tax, VAT, and income tax which covers amounts collected through PAYE) due on or after 1 April 2022, large UK groups should consider the notification of uncertain tax positions. The definition of large UK groups/companies is the same as for the SAO regime. 

An uncertain tax position is where a business believes that HMRC may disagree with its interpretation of the legislation, case law, or guidance. Reporting is required where the tax advantage to the company is more than £5 million. This legislation is expected to be enacted in Finance Act 2022. 

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 or your usual PKF contact.