Pillar Two and BEPS: What In-House Tax Teams Need to Know

The OECD’s work on base erosion and profit shifting (BEPS) has changed international tax more than anything else in a generation, and Pillar Two, the global minimum tax, is the part that now lands on the desks of in-house tax teams. In the UK it is law, it has live registration and filing obligations, and the first returns have already been due. For groups in scope it is now a recurring compliance cycle that needs data, systems and people.

This guide is written for heads of tax, in-house tax managers, Financial Controllers and Group Finance Directors who need a working understanding of the UK rules. It covers the UK rules, deadlines, safe harbour, data and resourcing. It is an orientation rather than a technical manual: the legislation, HMRC’s guidance and specialist advice remain the references for any specific position.

What BEPS and Pillar Two Are

BEPS describes the ways multinational groups could shift profits to low-tax jurisdictions and erode the tax base of higher-tax ones, using gaps and mismatches between national tax systems. The OECD’s BEPS project produced a set of coordinated measures to close those gaps: country-by-country reporting, rules on hybrid mismatches, limits on interest deductibility and a stronger focus on aligning profit with genuine economic activity. Many are now routine for international groups, particularly transfer pricing.

Pillar Two (often called the GloBE rules, for Global Anti-Base Erosion) goes further. It sets a minimum effective tax rate of 15% on the profits of large multinational groups in every jurisdiction where they operate. If a group’s effective rate in a jurisdiction falls below 15%, a top-up tax brings it back to the minimum. The aim is to remove the benefit of booking profit in low-tax locations: if the profit is taxed below the minimum somewhere, it will be topped up somewhere else.

How the UK Has Implemented Pillar Two

The UK legislated for Pillar Two in Part 3 of the Finance (No. 2) Act 2023, with later amendments. There are two UK taxes, which HMRC refers to together as Pillar 2 Top-up Taxes:

• Multinational Top-up Tax (MTT) — the UK’s version of the income inclusion rule. A UK parent pays top-up tax on low-taxed profits of its overseas subsidiaries. It applies to accounting periods beginning on or after 31 December 2023.
• Domestic Top-up Tax (DTT) — a qualifying domestic minimum top-up tax on low-taxed UK profits, so that any top-up on UK profits is collected by the UK rather than another country. It also applies from periods beginning on or after 31 December 2023, and it covers large UK-only groups as well as multinationals.
• The undertaxed profits rule (UTPR) — a backstop, delivered through MTT, that allows the UK to collect top-up tax where low-taxed profits in a group are not otherwise picked up, for example where the parent is in a country that has not adopted the rules. According to HMRC’s policy paper on the UTPR, it applies to accounting periods beginning on or after 31 December 2024.

The rules continue to move. In January 2026 the OECD Inclusive Framework published a “side-by-side” package that changes how the income inclusion rule and UTPR apply to groups headed in jurisdictions with qualifying minimum tax regimes, most notably US-parented groups, and the UK has been legislating to reflect it. Domestic top-up taxes such as DTT continue to apply. Any tax team working on Pillar Two needs a reliable way of tracking HMRC’s updates, the Multinational Top-up Tax and Domestic Top-up Tax manual and OECD administrative guidance.

Who Is in Scope

HMRC’s guidance on checking whether you need to report Pillar 2 Top-up Taxes sets out the test. A group must register if it has at least one entity located in the UK and consolidated group annual revenues of €750 million or more in at least two of the previous four accounting periods. References to groups include single entities that meet the threshold.

Three practical points follow. First, the threshold is measured on consolidated revenue, so the group’s consolidated accounts are the starting point and a reliable group consolidation process matters. Second, a group with only UK entities is still in scope for DTT if it meets the threshold. Third, the registration obligation applies even where no top-up tax is payable: a group with high effective rates everywhere still registers and still files.

Groups below the threshold, especially those growing by acquisition, should model when they might cross it. As our guide to building a scalable tax team says, plan the resource well before then: data and systems take far longer to build than registration.

Registration and Filing Deadlines

Registration

A group must register no later than six months after the end of its first accounting period that meets the criteria. Under HMRC’s registration guidance, only the filing member can register: either the ultimate parent entity or another group member it nominates (groups with an overseas parent often nominate a UK company). Agents and tax advisers cannot register on the group’s behalf, so someone in-house needs an organisation Government Gateway account and ownership of the process. For a calendar-year group in scope from its first period, the 2024 accounting period meant registration by 30 June 2025.

Returns

HMRC’s guidance on how to report Pillar 2 Top-up Taxes requires the filing member to submit a UK tax return together with either a GloBE information return (GIR) or an overseas return notification, where the GIR is filed in another jurisdiction. The deadline is 18 months after the end of the first accounting period and 15 months after the end of each later period. Submissions must be made through compatible software.

For the first cycle, HMRC adopted a transitional approach: no late filing penalties were charged where returns were submitted before 1 August 2026. That leniency was for the first deadline only. From the second period the window shortens to 15 months, which for a calendar-year group puts the next returns only nine months after the first ones. A first filing done with manual workarounds now needs to become a repeatable process.

Below-threshold notification

A registered group whose revenue has dropped can file a below-threshold notification instead of full returns, provided it has not had consolidated revenues of €750 million or more in at least two of the previous four periods and does not expect to reach that level in the next two.

The Core Mechanics at a Conceptual Level

The calculation is complex, but the logic is straightforward. For each jurisdiction, the group works out its GloBE income (accounting profit with specific adjustments) and its covered taxes (current and certain deferred taxes, again adjusted). Covered taxes divided by GloBE income gives the jurisdictional effective tax rate. If that rate is below 15%, the shortfall is applied to the excess profit, which is GloBE income less a substance-based income exclusion that reflects payroll and tangible assets in the jurisdiction. The result is the top-up tax, which is then collected first by any qualifying domestic top-up tax, then by the income inclusion rule, and finally by the UTPR.

None of these numbers drops out of the existing tax computation. GloBE income starts from the accounting figures used for consolidation, not taxable profit, and covered taxes include deferred tax recast at 15%. Everything is cut by jurisdiction, not by entity or segment.

The Transitional Country-by-Country Reporting Safe Harbour

To ease the early years, the rules include a transitional safe harbour based on country-by-country reporting (CbCR) data. If a jurisdiction passes one of three tests, the top-up tax for that jurisdiction is treated as nil and the full GloBE calculation is not needed there. Under Schedule 16 to the Finance (No. 2) Act 2023, the election is available for accounting periods beginning on or before 31 December 2026 and ending on or before 30 June 2028.

• De minimis test — revenue in the jurisdiction below €10 million and profit before tax below €1 million.
• Simplified effective tax rate test — a simplified rate at or above the transition rate: 15% for periods beginning before 1 January 2025, 16% for periods beginning in 2025 and 17% for periods beginning on or after 1 January 2026.
• Routine profits test — profit before tax no greater than the substance-based income exclusion, or a loss.

The safe harbour depends on “qualified” CbCR data, prepared from the consolidated financial statements. That raises the standard for a report that some groups previously treated as a once-a-year exercise. It is also temporary. The rising transition rate makes the effective tax rate test harder to pass each year, and once it ends, every jurisdiction needs a full calculation unless a permanent safe harbour applies. The transition years are the time to build capability.

Data Requirements for Tax and Finance Teams

The GIR is a substantial return, and the most common difficulty groups report is data rather than technical interpretation. The information sits across group reporting, local statutory accounts, tax computations, payroll and the fixed asset register. Typical requirements include:

• a complete group structure with ownership percentages and the jurisdiction of every constituent entity, including permanent establishments and joint ventures;
• entity-level financial accounting profit on the basis used for consolidation, with the adjustments to reach GloBE income (for example dividends, equity gains, certain intra-group items and stock-based compensation);
• current tax and deferred tax by entity, with deferred tax recast at the 15% rate and movements tracked year on year;
• eligible payroll costs and the carrying value of tangible assets by jurisdiction for the substance-based income exclusion;
• CbCR data reconciled to the consolidated accounts for the safe harbour, and an audit trail from the GIR back to the ledgers.

Much of this sits with the group finance team rather than the tax team. The tax function depends on the consolidation, the intercompany reporting and the accounting policies used in local statutory accounts. Groups that report under different frameworks locally and at group level need to understand where the differences arise; our guide to IFRS versus UK GAAP in practice explains the common ones. The groups that cope best collect Pillar Two data in the year-end reporting pack, not months later.

Financial reporting

The accounting side has its own requirements. Amendments to IAS 12 Income Taxes introduced a mandatory temporary exception from recognising deferred tax arising from Pillar Two, along with disclosure of current top-up tax and of the group’s exposure, and FRS 102 was amended in a similar way. Group tax and group reporting need to agree those numbers.

The Practical Implications for In-House Tax Teams

For groups in scope, Pillar Two affects the tax function in four ways. The first is the compliance burden described above: registration, annual returns, safe harbour elections and the data behind them. The second is cost: groups with low-taxed operations, incentive regimes or large tax credits may face actual top-up tax, and it needs forecasting and provisioning. The third is strategy: the global minimum removes much of the benefit of low-tax locations, so structures need reviewing with specialist input. The fourth is governance: clear ownership of the filing member role, sign-off of returns and a link into existing Senior Accounting Officer and tax risk frameworks.

Pillar Two sits on top of existing obligations such as corporation tax returns, instalment payments and CbCR (see our guide to in-house corporation tax compliance), and the extra work falls in the busy months after the year-end.

How to Approach the Obligations

A sensible sequence for a group either newly in scope or moving from a first filing to a repeatable cycle:

• Confirm scope and the filing member. Test the revenue history, decide which entity files and make sure registration is in place.
• Run the safe harbour by jurisdiction. Identify where the CbCR safe harbour applies and where full calculations are needed, and track how the rising transition rate affects that each year.
• Map the data. List every data point the GIR needs, who owns it and which system holds it, and build the collection into the year-end reporting pack.
• Choose the tools. Returns must be filed through compatible software.
• Decide what to keep in-house. Outsourcing everything carries cost and key-person risk; our guide to managing external tax advisers covers how to split the work.
• Keep current. Assign someone to track HMRC and OECD updates.

Hiring for Pillar Two: Skills and Salaries

Pillar Two has created demand for a profile that is still scarce: a tax professional who understands the GloBE rules, can work from consolidated accounting data and is comfortable with systems and large data sets. The strongest candidates usually combine international tax or transfer pricing experience with a group reporting background, often ACA or ACCA with the CTA. Many have come through Big Four international tax or tax technology teams; our guide to moving from practice tax to in-house explains what those candidates look for in an in-house role.

Salaries reflect that scarcity. Our in-house tax manager salary guide puts the main bands at:

Base salary only; bonus and benefits are additional. A Pillar Two specialist at senior manager level in London will typically sit in the international tax band, and the Head of Tax range reaches the top end where the role combines corporation tax depth with international experience across several jurisdictions.

Permanent, interim or both

Most groups need a permanent owner for the cycle, usually an international tax manager or a senior corporate tax manager with Pillar Two responsibility. Interim specialists are useful for the peaks: the first year of a new filing cycle, a data remediation project, a software implementation or cover while a permanent hire works notice. Our interim tax recruitment service handles these assignments, and the interim tax day rates guide sets out typical costs. The data side often needs a group finance hire as well.

When briefing a search, say whether the group is already filing, which jurisdictions drive the work and what software is used: that separates candidates who have run a cycle from those who have only attended the training. Our main tax recruitment page explains how we run tax searches across permanent, interim and fractional roles.

Pillar Two FAQs

Do we have to register if no top-up tax is payable?

Yes. HMRC’s guidance is clear that in-scope groups must register even where they owe no top-up tax, and they must still file returns or a below-threshold notification.

When are the returns due?

18 months after the end of the first accounting period, then 15 months after the end of each later period. For a calendar-year group the first returns were due on 30 June 2026 and the 2025 returns are due on 31 March 2027.

What does a Pillar Two specialist cost?

In London, senior international tax managers typically earn £85,000–£120,000, with interim tax managers at around £450–£700 a day. See the salary table above for other levels and regions.