The UK has announced that it is to formally commit to implementing the new country-by-country reporting template unveiled recently by the OECD. The template is designed to help tax authorities gather information on multinational companies’ global activities, profits and taxes, enabling them to better assess where risks lie and where their efforts to counter tax avoidance should be focused.

In addition, the Government has also announced a “clampdown” on the use of ‘hybrid mismatches’, referred to as a technique commonly used by multinational companies to significantly reduce their tax bills.

According to the announcement, hybrid mismatch arrangements exploit differences between countries’ tax rules to avoid paying tax in either country, or to obtain more tax relief against profits than they are entitled to.

The UK has worked with G20 and OECD member countries as part of the BEPS project to agree a solution that prevents companies from taking advantage of this and proposals were endorsed by G20 Finance Ministers at their meeting in Cairns in September.

In the announcement it is confirmed that the government will publish a consultation on the implementation of rules to prevent hybrid mismatches at the Autumn Statement on 3 December.

As part of the consultation, the Government will be considering the case for special provisions for banks’ and insurers’ hybrid regulatory capital instruments (an area in which the OECD has allowed countries to make independent policy decisions). These provisions would prevent these instruments from being used for tax avoidance purposes, while recognising banks’ and insurers’ unique regulatory requirements and looking to ensure that they are not disadvantaged relative to other sectors.