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UK Mining Companies Get Transitional Relief Under New Reporting Requirements

by Jason Gorringe, Tax-News.com, London

29 August 2014


Mining, gas, and oil companies registered in the UK will now be required to report on the payments made to governments in all the countries they operate in as of January 1, 2015, Business Minister Jo Swinson announced on August 21, 2014.

The UK government has released The Reports on Payments to Governments Regulations, 2014 (Regulations), under which extractives companies will have a maximum of 11 months after the end of their financial year to file a report at Companies House detailing their extractives payments. The Regulations have, however, put in place a transitional arrangement for UK-registered subsidiaries of parent companies registered in other European Union member states.

The Regulations will apply to all undertakings in relation to a financial year starting on or after January 1, 2015, apart from those undertakings who are subsidiaries of parent undertakings who are obliged to prepare consolidated group accounts in EU member states other than the UK. These Regulations will apply in relation to financial years for these undertakings beginning on or after January 1, 2016.

The exemption offered to UK subsidiaries aims at preventing an undertaking from having to prepare and file a report in the UK for one year only, where from January 1, 2016, such undertakings would be included in a consolidated report prepared in another member state under the requirements in Article 44 of the Accounting Directive (the Directive), 2013/34/EU1, which requires parent undertakings that prepare consolidated financial statements to prepare consolidated reports.

The introduction of this transparency requirement makes the UK the first EU country to introduce reporting requirements on extractives companies. This follows on from the Prime Minister's commitment to promote transparency in the extractives industry at the Group of 8 (G-8) meeting in Lough Erne, in 2013.

Business Minister Jo Swinson said: "Oil, gas, and mining can, if well managed, deliver precious economic benefits to the populations of developing countries. Too often, though, the assets from resource-rich countries are not benefiting local people or the local economy. The UK is determined to lead by example which is why we have introduced reporting requirements on UK based extractives companies early."

She added: "These changes will result in greater transparency, helping build a stronger economy and ensuring people around the world have the information they need to hold their governments to account. This new reporting requirement implements Chapter 10 of the EU Accounting Directive, which was agreed in June 2013."

Between March 28 and May 16, 2014, the UK government invited stakeholders' views on proposals for new reporting requirements for extractive industries. There was a difference of opinion in relation to the reporting of subsidiaries registered in the UK but with a parent company in another member state. Civil society responses argued that the subsidiary should report in its own right in the UK until such time as it is able to report through the parent company. Many industry responses disagreed and argued for an exemption for such companies. Accountancy professionals felt that, to avoid confusion, subsidiaries should be exempt from reporting until consolidated reports in the parent member state could be completed.

TAGS: tax | investment | business | holding company | tax avoidance | mining | revenue guidance | law | accounting | United Kingdom | enforcement | offshore | agreements | multinationals | professionals | legislation | tax planning | transfer pricing | tax reform | standards | regulation | trade | European Union (EU) | Europe | Regulations

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