Guidance

How to prepare for the Multinational Top-up Tax and the Domestic Top-up Tax

Updated 9 April 2025

1. UK adoption of Organisation for Economic Cooperation and Development (OECD) Pillar 2 model rules

1.1 Background

In October 2021, the UK and over 135 other countries agreed as part of the OECD Inclusive Framework to a two-pillar solution to reform the international corporate tax framework in response to the challenges of digitalisation.

Pillar 2 of this solution, known as the Global Base Erosion (GloBE) rules, requires a group with consolidated annual revenues of more than €750 million to pay a minimum 15% tax on its profits in each jurisdiction it operates in.

As part of the UK adoption of the OECD Pillar 2 rules, the government has announced 2 new taxes:

• the Multinational Top-up Tax (MTT)
• Domestic Top-up Tax (DTT)

These apply to accounting periods that began on or after 31 December 2023.

1.2 Multinational Top-up Tax and Domestic Top-up Tax

Multinational Top-up Tax

MTT requires all groups with both UK and non-UK entities and sufficient consolidated revenue to register with HMRC. A charge may arise on UK parent members within such a group, where a UK parent member has an interest in an entity in a non-UK jurisdiction, and the group’s profits arising in that jurisdiction are taxed below the minimum rate of 15%.

Domestic Top-up Tax

DTT requires all groups with UK entities and sufficient consolidated revenue to register with HMRC. A charge may arise on UK members within a domestic or multinational enterprise group where UK profits are taxed below the minimum rate of 15%.

2. How to prepare for these changes

Businesses will need to prepare for complying with MTT and DTT in the UK, as well as the adoption of Pillar 2 in other jurisdictions.

Work at the OECD is ongoing to ensure that implementation of Pillar 2 rules is coordinated to achieve better tax certainty for businesses and reduce compliance costs.

To help businesses meet their UK obligations, we have included below the updates and support which we have issued in our ‘Pillar 2 update’ letters to businesses that we consider to be within scope of the new taxes. We will offer more updates and support as the implementation of Pillar 2 rules progress.

Please email us if:

• you want to receive email updates on Pillar 2 developments, guidance, and event information – this may help your business prepare for the changes
• you are not sure whether you’ll be in scope of MTT and DTT and would like to discuss this with us

If you have a tax adviser, you may want to discuss these taxes with them.

2.1 Webinars

We’re offering webinars in the Spring and Summer of 2025. These will cover the scope of the legislation, reporting obligations, and transitional safe harbours.

To sign up to our webinars, go to:  Organisation for Economic Co-operation and Development (OECD) Pillar 2 – Scope and UK compliance obligations and select the link to register for the next live webinar.

First webinar: Wednesday 30 April 2025 11.45am to 12.45pm

This will support both businesses that must comply with the new Pillar 2 rules and external agents or firms that advise those business about Pillar 2.

These webinars will be recorded and made available to view on GOV.UK after the event.

If you have suggestions for topics you’d like us to cover, please email us.

3. UK Legislation and obligations

3.1 UK legislation

 The UK legislation that implements MTT and DTT is contained in:

• Finance (No.2) Act 2023
• Finance Act 2024
• Finance Act 2025

Finance Act 2025 also formally introduces the legislation to bring the Undertaxed Profits Rule (UTPR) into effect for periods starting on or after 31 December 2024.

The UK legislation includes a reporting process which includes:

• a requirement for groups with consolidated revenue above €750 million to register with HMRC when they first come into scope of the Pillar 2 rules
• an annual Self Assessment return to report details of the group’s MTT and DTT liabilities
• the requirement to submit a GloBE Information Return (GIR) which shows the group’s global Pillar 2 tax calculations, or to submit an overseas return notification (where an information return has been submitted to another qualifying authority)

Groups will have UK obligations even if they do not have MTT or DTT liabilities. These obligations will apply to both UK-headed and non-UK headed groups irrespective of whether the jurisdiction of the Ultimate Parent Entity implements Pillar 2.

3.2 Registration requirements

All businesses in scope of Pillar 2 taxes must register using our Pillar 2 online service. Even if you don’t think the group will have to pay any top-up tax, it must register if it has:

• at least one entity in the UK, and
• consolidated group annual revenues of €750 million or more, in at least 2 of the previous 4 accounting periods

‘Groups’ also includes single entities.

Groups with an ultimate parent outside the UK must register regardless of whether the jurisdiction of the Ultimate Parent Entity (UPE) implements Pillar 2.

There is a single registration process for MTT and DTT. A group only needs to register once - it’s not an annual requirement.

When to register by

A group must register no later than 6 months after the end of the first accounting period in which it’s subject to the rules. For example, if a group’s accounting period ended 31 December 2024, it must register by 30 June 2025.

If a qualifying group doesn’t register on time, it may be liable to a penalty under Schedule 41 Finance Act 2008.

How to register

A group must register using the Report Pillar 2 top-up taxes digital service on GOV.UK. Only the filing member for the group should use the online service. This will be the UPE unless it nominates another group entity. For example, groups with an overseas UPE may wish to nominate a UK group member to be the filing member. Agents and tax advisers can’t register on a group’s behalf.

Once you’ve signed in to the Government Gateway, registration is simple. You don’t need to give us any financial information. All you need is:

• details of the UPE
• details of the filing member, if it’s not the UPE
• whether the group has entities only in the UK, or in the UK and other jurisdictions
• contact details for the person or tax team responsible for filing returns
• the accounting period start and end dates

When you register, you’ll get a Pillar 2 reference number. Please make a note of it and the date you register. You may wish to use the print page function to save a PDF, as you won’t receive a registration email confirmation. You’ll need this information if you want to contact us later.

3.3 Reporting obligations

The filing member will be the primary point of contact for HMRC in relation to Pillar 2 taxes.

The filing member will be responsible for:  

• registering with HMRC for MTT and DTT
• notifying HMRC of any changes to the filing member
• submitting the GloBE Information Return (GIR) or Overseas Return Notification (ORN)
• submitting a UK Self Assessment return or Below Threshold Notification (BTN)
• making or revoking elections
• ensuring the group keeps accurate records

GloBE Information Return

A GloBE Information Return (GIR) is a standardised return that will facilitate the global administration of the Pillar 2 rules. All groups in scope of Pillar 2 must file one for every accounting period that the group is in scope.

The GIR will have a general section and multiple jurisdictional sections based on one template that needs to be completed for every jurisdiction where the group operates. The general section asks for information about the group, the filing Constituent Entity, and an outline of the corporate structure. A summary table requires a high-level overview of the application of the GloBE rules in every jurisdiction where the Multinational Enterprise Group operates.

The jurisdictional sections ask for limited information about jurisdictions where relevant safe harbours and exclusions apply. For jurisdictions where safe harbours and exclusions don’t apply, the group will report its Effective Tax Rate (ETR) computations, Top-up Tax computations if necessary, and the allocation of Top-up Tax. Recent OECD updates give more detail about the format of the GIR (see 5.2 below).

If certain conditions are met, groups will be able to use central filing. Under central filing, the group will file the GIR with one tax administration, which will then share the relevant information with the other jurisdictions that are entitled to receive it. In order for central filing to be possible, the entity that files the GIR must be located in the jurisdiction that will carry out the exchange of the GIR with the other jurisdictions.

If a group files a GIR with a tax administration outside the UK, and expects that tax administration to provide it to HMRC, the group must file an Overseas Return Notification (ORN) in the UK, advising where it filed the GIR.

A group has 18 months to submit the GIR (or ORN) for the first accounting period it’s subject to Pillar 2 taxes. For example, for the accounting period ended 31 December 2024 the filing date for the GIR will be 30 June 2026. After that, the group must submit a GIR or ORN to HMRC within 15 months of the end of the accounting period. There are special rules for short accounting periods so that no GIR or ORN needs to be submitted before 30 June 2026.

UK Self Assessment return

One UK Self Assessment return will cover both MTT and DTT. It will include the group’s total MTT and DTT liability as well as the liability for each UK member of the group for the period. It won’t contain detailed calculations to determine the amount of tax owed - these will be in the GIR. It also won’t require a list of UK members of the group without a liability.

All registered groups must submit a Self Assessment return, regardless of whether the jurisdiction of the UPE implements Pillar 2. This includes groups that don’t have an MTT or DTT liability. 

The deadline for filing the UK Self Assessment return is always the same as for the GIR or ORN.

If a group stops being a qualifying group, it can submit a Below Threshold Notification and will no longer need to submit a Self Assessment return.

4. HMRC online service

We’re continuing to develop our online service to enable businesses to meet their MTT and DTT obligations. You can use this service now to fulfil your registration obligations, as detailed above. The latest release was 20 November 2024, providing functionality to change a filing member, enabling payments and repayments, and adding Pillar 2 to Agent Services. We’re releasing the service in stages, with functionality to file returns and make notifications to follow, in advance of legislative requirements.

We’re working with third-party software providers to support you in complying with your UK obligations. You will need to use software for some of your submissions. We’d also welcome more businesses helping us to further develop the online service. Please get in touch if you’d like to take part.

5. Guidance

5.1 HMRC guidance

We published a supplementary document of draft HMRC guidance on 28 January 2025, which includes:

• new provisions introduced in the current Finance Bill, including the Undertaxed Profits Rule (UTPR)
• provisions significantly amended by the current Finance Bill
• joint venture groups
• flow-through entities
• specifics for the insurance sector
• additional top-up amounts and post-filing adjustments of covered taxes
• pages that have been significantly amended following previous consultation responses

Comments are being accepted on this and earlier draft guidance until 8 April 2025. Following feedback in this consultation window, we’ll publish the full guidance manual in mid-2025. 

To see the draft guidance, follow the link above. You’ll find previous consultations on guidance via the Multinational Top-up Tax and Domestic Top-up Tax collection page, in the section ‘Public consultations’.

5.2 OECD guidance

The OECD Inclusive Framework has been working on the standardised GIR and further administrative guidance.

As part of this, the Inclusive Framework has streamlined the co-ordinated administration of the global minimum tax. On 15 January 2025, it released details of legislation receiving qualified status under the peer review process, and other tools, including:

• updates to agreed administrative guidance on articles 8.1.4, 8.1.5 and 9.1 of the GloBE rules
• an update to the standardised GIR, a supporting XML schema and a Multilateral Competent Authority Agreement (MCAA) to facilitate central filing and exchange of the GIR.

Please read these updated publications. They’ll give more details on what you’ll need for the GIR and the format of the return. To find them, go to www.oecd.org and search ‘Pillar 2’.

Before this, the OECD published further Agreed Administrative Guidance (June 2024) and Consolidated Commentary to the Global Anti-Base Erosion Model Rules, incorporating the Agreed Administrative Guidance that was released by the Inclusive Framework between March 2022 and December 2023. There are also ‘Illustrative Examples’.

OECD guidance:

• Agreed Administrative Guidance – published 17 June 2024 
• Consolidated Commentary to the Global Anti-Base Erosion Model Rules (2023) – published 25 April 2024 
• Illustrative Examples – published 25 April 2024 
• Agreed Administrative Guidance – published December 2023 

Other useful publications on the OECD website: 

• GloBE Model Rules 
• Pillar Two Rules in a Nutshell 
• Key Operating Provisions of the GloBE rules – published 20 December 2021 
• Safe Harbours and Penalty Relief: GloBE Rules – published 20 December 2022 
• Administrative Guidance on the GloBE rules – published 2 February 2023

6. Pillar 2 scope and compliance obligations

To help you decide whether your business is in scope, here is an overview of MTT and DTT.

6.1 Scope of MTT

A group will be within scope of MTT if these 2 apply:

• it has at least one member in the UK and one member outside the UK
• it meets the revenue threshold test

The revenue threshold test is met if the group has revenue in excess of €750 million (reduced for periods of less than a year) in any 2 of the four previous periods. The revenue of the group members is taken from the consolidated financial statements of the ultimate parent entity for the period, and so the revenue of all group members – both UK and non-UK – is included in this test.

Special rules apply if there has been a merger or demerger in the tested period or any of the prior four periods. More information can be found in our guidance (MTT11010).

Investment entities and certain excluded entities are not within scope of MTT and DTT. For more information about the types of excluded entities, please refer to our guidance (MTT10010).

6.2 Scope of DTT

A group or UK entity will be within scope of DTT if both of the following apply:

• it has a UK presence
• it meets the revenue threshold test

Groups with only UK members and single UK entities can be in scope, as well as the UK operations of multinational groups. Where the entity is a member of a group, the €750 million revenue threshold test is applied to the group as a whole. As with MTT, the revenue of all group members – both UK and non-UK - is included in this test.

6.3 Common misconceptions

Some businesses have estimated that they won’t have to pay any MTT and/or DTT but have mistakenly assumed that this means they won’t have UK compliance obligations. As with other UK direct taxes, if your business is in scope, you’ll still have reporting obligations, even if there’s no tax liability. This means you’ll need to register for Pillar 2 top-up taxes, file returns and make notifications. This applies to both UK and non-UK headed groups, regardless of whether the jurisdiction of the ultimate parent entity implements Pillar 2.  

The group’s filing member will need to submit a UK Pillar 2 Self Assessment return and a GloBE Information Return (GIR) to HMRC for every accounting period that the group is within scope of MTT and DTT - or DTT only, if the group is a domestic-only group. The filing member does not need to be UK resident. However, if the filing member is not UK resident, HMRC will not be able to automatically exchange any GIR. This also applies to businesses where the UK presence is limited to a UK branch.

7. Transitional safe harbour

You may be able to take advantage of the transitional Pillar 2 safe harbour, to make it easier for you to administer the new taxes. Qualifying for a safe harbour doesn’t exclude you from registering and filing returns. 

A transitional safe harbour aims to reduce the compliance obligations for groups in the first years of the regime. It allows groups to use figures calculated for the purposes of Country-by-Country (CbC) reporting to assess if they’re likely to face a top-up tax under MTT for a territory. If these simplified calculations show that one of the safe harbour tests is met, the group is treated as having no tax charge and doesn’t have to perform the full effective tax rate calculation. 

You’ll find this in our draft guidance at MTT15900 onwards.  

The safe harbour applies on a territory-by-territory basis and consists of three tests. The tests are calculated based on qualified CbC report figures. A CbC report will be a qualifying report in respect of a territory if, for that territory, the information is prepared based on qualified financial statements. For the definition of qualified financial statements, see MTT15920. 

A group only needs to meet one of the following tests to qualify for the safe harbour: 

• the threshold test – where revenue of members in a territory is less than €10 million and profit before tax is less than €1 million (or a loss) 
• the simplified effective tax rate test – where the simplified effective tax rate (ETR) of members in a territory is at least the ‘minimum’. The ETR is calculated as the members’ qualifying Income Tax expense divided by the aggregate profit (or loss) before Income Tax for those members. The ‘minimum’ ETR is 15% for accounting periods beginning in 2023 or 2024, 16% for accounting periods beginning in 2025 and 17% for accounting periods beginning in 2026 
• the routine profits test – where the aggregate profit (or loss) before Income Tax of members in a territory is not greater than the qualified substance-based income exclusion (SBIE) for the territory. The SBIE is calculated using the model rules 

7.1 Transitional safe harbour – election 

A group must make an election for the safe harbour to apply for a territory in an accounting period. This election is made annually on the GIR. 

If a group has already submitted full MTT calculations for a territory, they can’t make the election for subsequent periods. This is because the purpose of the transitional safe harbour is to reduce the compliance burden for groups first entering the scope of MTT. 

7.2 Transitional safe harbour – DTT and groups not required to prepare a CbC report 

If a group is in scope of MTT but not in scope of CbC reporting they won’t have prepared a CbC report. In these cases, the group can use the figures that would have appeared in a qualifying CbC report had they been required to prepare one. 

The transitional safe harbour applies for DTT purposes in the same way as it does for MTT, with some exceptions for wholly domestic groups and entities. For more information, see our draft guidance at MTT15970.

7.3 Transitional safe harbour – other things to note 

You’ll need to make some adjustments to the CbC report figures for the purpose of the transitional safe harbour. These adjustments make sure the calculations for the safe harbour tests are more closely aligned to the calculations that would normally be made for MTT. For more information, see our draft guidance at MTT15925. 

The above is not a comprehensive summary of the rules relating to MTT and DTT. You should refer to the legislation and guidance for detailed information.  

If you have any questions, or suggestions about what you’d find useful to cover in future updates, please email us.