Pillar 2 UK administrative requirements

In this article, we explore the Pillar 2 UK administrative requirements – what it is, who is in scope,  and what you need to do now. 

What is Pillar 2?

Pillar 2 forms part of an international initiative developed by the Organisation for Economic Cooperation and Development (“OECD”) to address the tax challenges presented by the digital economy, and curb profit shifting by multinational enterprises (“MNEs”).

Pillar 2 introduces a global minimum tax rate of 15% for large MNEs, ensuring such groups pay their fair share of tax no matter where they operate. While the concept is international in scope, jurisdictions are adopting Pillar 2 in accordance with their individual tax systems and timelines. As a result, businesses may face varying Pillar 2 compliance obligations depending on where they operate.

Who is in scope?

Pillar 2 is aimed at large MNEs i.e. those with annual revenues of more than €750 million in at least two of their previous four accounting periods.

What are the UK reporting requirements?

While Pillar 2 tax calculations are likely to be undertaken by the MNE group parent, if the MNE has a UK presence (a subsidiary, or potentially even just a UK branch), a UK notification is required, and annual filings must be submitted, even if no additional tax is due in the UK.

• Initial notification – A one-time requirement for MNEs subject to Pillar 2 to report they have a UK presence and will therefore need to make ongoing filings. This notification must be submitted within 6 months after the end of the first accounting period in scope; So the earliest deadline would be 30 June 2025, for a group with a December year end.

• Annual self-assessment return

  – required to report any UK tax due (either “multinational top up tax” and/or a “domestic top up tax”.) This return must be submitted within 18 months of the end of the first accounting period that falls within the scope of Pillar 2. For subsequent periods, the return is due within 15 months of the accounting period end. For a group with a December 2024 year-end, the first deadline would therefore be 30 June 2026.

• Information return / Notification of overseas filing

  – The information return contains details including the group structure and how the effective tax rate, top-up tax and allocation of top-up amounts have been calculated in every applicable jurisdiction. Alternatively, where an information return has been filed with a tax authority outside the UK, a notification of overseas filing may be sufficient.The return/notification must be submitted within 18 months of the end of the first accounting period that falls within the scope of Pillar 2. For subsequent periods, the return is due within 15 months of the accounting period end. For a group with a December 2024 year-end, the first deadline would therefore be 30 June 2026.

What do UK businesses need to do “now”?

While group tax teams are likely well underway in terms of calculating Pillar 2 amounts, they are likely to be less familiar with local reporting requirements in the territories in which they operate, and may be relying on local finance teams to ascertain this information.

The initial deadlines are still some way off,  but if you are a UK-based business forming part of a larger international group, it is worthwhile flagging these UK requirements to your group tax team.

If any assistance is required with the UK aspects of the regime, Price Bailey’s international tax specialists are well placed to assist.