In response to the Organisation for Economic Co-operation and Development’s (OECD) global initiative to combat profit shifting and ensure a minimum level of taxation, the UK is introducing new compliance obligations under Pillar 2 for large multinational groups. These updated rules mark an important shift in the international tax landscape, requiring affected groups to navigate updated registration, reporting, and payment requirements.
Pillar 2 was originally introduced to address some of the tax challenges that have stemmed from the digitisation of economies around the globe.
This article outlines the key elements of the UK’s implementation, including who must register, when filings are due, and how the regime is expected to operate in practice.
What is the new registration requirement in the UK?
Groups with at least one UK taxable entity and consolidated annual revenues of €750 million or more, in at least two of the last four years, are required to register for the new requirement with HMRC.
The registration deadline is six months after the end of the first accounting period in which the group becomes subject to the Pillar 2 rules, for example, 30 June 2025 for a group with a year-end of 31 December 2024.
To register, the filing member for the group (the UPE or an entity nominated by the UPE) must register for Pillar 2 using its Online Government Gateway account. For this, tax agents cannot register the group for Pillar 2, only the filing entity can register.
To register, the filing entity must provide details of the UPE, the filing member (if this is not the UPE), confirmation of whether group is purely UK or if it has non-UK members, contact details for the person responsible for filing the returns and the accounting period start and end dates.
HMRC guidance can be found at: https://www.gov.uk/guidance/report-pillar-2-top-up-taxes
What Is pillar 2?
Pillar two is an OECD driven tax legislation intended to ensure that a minimum tax rate of 15% applies to all profits globally wherever these are generated. To achieve this, pillar two has two core elements:
The IIR acts in a similar manner to the long-standing Controlled Foreign Companies (“CFC”) legislation, as it is the under-taxed profits that are subject to tax in the parent entity via a top-up tax to bring the rate up to 15%. In practice, many low-tax jurisdictions have introduced levies for companies subject to Pillar 2 to ensure that any top-up tax is paid locally.
The UTPR applies to the allocation of a top-up tax to another entity in the group if the profits would not otherwise be subject to the IIR i.e. if the Ultimate Parent Entity (“UPE”) is not subject to Pillar 2.
First accounting period subject to Pillar 2
The first Accounting Period within the scope of Pillar 2 is the period beginning on or after 31 December 2023 and for most groups, this would be the year ending 31 December 2024 or 31 March 2025.
Annual GloBE Information return
A Global Anti-Base Erosion Information Return (“GIR”) must be filed each accounting period that the group is subject to the Pillar 2 rules. Where a GIR is filed with a non-UK tax authority which has agreed to share this with HMRC the group must submit an Overseas Return Notification (“ORN”) in the UK. Both the GIR and ORN are due within 18 months of the end of the first accounting period in which the entity becomes subject to Pillar 2, and within 15 months of the end of each subsequent accounting period.
Tax payment
Where tax is payable under Pillar 2, this amount must be paid by the filing deadline for the GIR or the ORN, as applicable. This ensures alignment between the reporting and payment obligations under the Pillar 2 framework, supporting timely compliance with the global minimum tax requirements.
We’d love to hear from you. To book an appointment or to find out more about our services:
