New Pillar 2 filing requirements for large businesses

Businesses with a global turnover of €750m or more could have registration and filing requirements in the UK – irrespective of the size of their UK presence.

HMRC has introduced a new compliance requirement in its Pillar 2 guidance that applies to the largest groups and, while this has not been widely publicised and the guidance is still in progress, the first filing date (for companies with a 31 December year-end) could be 30 June 2025.

Those that fall within the scope of the new rules - UK entities that are part of Multi-National Enterprise (MNE) groups or large UK groups with a total turnover exceeding €750m - will need to review their position to ensure compliance. This even applies to smaller UK businesses that are part of large, worldwide organisations.

What is Pillar 2?

Pillar 2 is a set of international tax rules that effectively apply a global minimum tax of 15% across numerous jurisdictions for accounting periods beginning on or after 31 December 2023.

Tax authorities in different jurisdictions are in the process of implementing these rules, and in the UK this comes under the introduction of Multinational Top-up Tax and Domestic Top-up Tax.

• Multinational top-up tax - mainly chargeable on UK-parented multinationals and certain UK intermediate holding companies. It acts to impose the minimum tax of 15% across the group.
• Domestic top-up tax - puts a 15% effective tax rate floor under UK members of large groups, regardless of where they are headquartered

 UK reporting requirements

There are filing requirements in respect of Pillar 2, even if there is no additional tax to pay. This involves:

1. Registering with HMRC via a special portal - this is different to any existing HMRC registrations the company may have. The deadline for registration is six months after the end of the first period in scope (for a December 2024 year end, the registration deadline is 30 June 2025).

2. Submit a return to HMRC - details as to the type of return will vary depending upon the facts of the group structure and local tax position.

Ensure compliance and seek advice

As always, HMRC has the power to charge penalties for non-compliance. The Pillar 2 rules are complex, and advice is likely to be required to navigate the compliance requirements in all jurisdictions in which the MNE group operates, as well as to calculate any amounts of ‘top-up’ tax that should be reported in each jurisdiction.

Usually, the parent entity of the MNE group will lead on this, seeking advice in its local jurisdiction as well as overseas to coordinate a worldwide approach to consider all Pillar 2 requirements – the results from this ‘project’ would then be used to enable local reporting and filing obligations to be met by each of its subsidiaries.

For affected businesses, it is important that they understand approaching deadlines and their UK filing obligations.